The IPO process will be explained step by step and we also show the role of the underwriter behind the initial public offering. Mainly the small private companies issue IPO to grow and trade publicly.
The process of initial public offering consists of several steps
Steps for Initial public offering are discussed below:
When a company is aiming to go public, at first it hires an investment bank to do the underwriting, the way of raising money through equity or debt, functions associated with the issue.
Although, a company itself also may sell its shares but, usually an investment bank is selected for that purpose.
Underwriters act as intercessors between the public, who are investing, and the companies.
The investment bank and the company will first initiate the process of deal negotiation. The main discussing issues are the money amount that the company is going to raise, security type to be issued and all the other details involved with the underwriting agreement.
Once the deal gets finalized, the investment bank sets a registration statement up which will be submitted to the Securities and Exchange Commission.
Lecture 9: IPO (Initial Public Offer) process in India for SEBI Grade A
That registration statement consists of information regarding the offering and also other company informations like, background of the management, financial statements, legal issues etc.
Then the Securities and Exchange Commission (SEC) needs a cooling off period during which it will examine all the submitted documents and make sure that all information regarding the deal have been given to them. After getting the SEC’s approval, a date is going to be fixed on which the company will offer the stock to the public.
During the above mentioned cooling off period the underwriter publishes an initial prospectus that contains all the necessary information regarding the company.
The effective date of issuing the stock as well as the price have not been mentioned in the prospectus, for these are not known at this time.
Then the company and the underwriter meets to decide the price of the stock.
This decision depends highly on the current market condition.
Lastly, the stocks are sold in the market and money is raised from the investors.
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