An IPO referred to an “offering” or “flotation,” is when a company issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies seeking to become publicly traded.
Initial public offerings usually involve one or more investment banks known as “underwriters”. The company offering its shares, called the “issuer”, enters in to contract with a lead underwriter to sell its shares to the public. The underwriter later approaches investors with offers to sell these shares.
An Initial public offering let a company to tap a wide pool of stock market investors and to provide its business with large volumes of capital for future growth. The company is never need to repay the capital but instead, the new shareholders have a right to future profits distributed by the company and the rights to a capital distribution in case of dissolution.
Actually, most of Initial public offerings both globally and in the United States have been underpriced. The effect of “initial underpricing” an IPO is to generate more interest in the stock when it first becomes publicly traded. The underpricing of IPO’s has been well documented in different markets. If a stock is offered to the public at a higher price than the market will pay, the underwriters may have trouble meeting its commitments to sell shares. Even if they sell all of the issued shares, if the stock falls in value on the first day of trading, it may lose some marketability and hence even more of its value.
For individual investors, it is difficult to foresee how stock or shares will perform on its initial day of trading and in the forthcoming future as there is often little historical data which can analyse the company. When Company EYE preparing pre IPO Business Plan they publish detailed research of company business its forecast and future growth.
When the IPO Business Plan is published, brokers could take orders to buy shares from those clients who indicated the interest during the cooling off period (before its shares are listed). A copy of the final prospectus must go before or accompany all sales confirmations.
When company lists its shares on public exchange, it would be able to issue further shares via right issues, by again providing itself with new capital for growth without incurring any debt. This common ability allow to raise substantial amounts of capital from the general market, instead of having to seek and negotiate with individual investors, In other words it is a key incentive for many companies seeking to list.
Company EYE Ltd specialises in providing services to companies seeking to list its shares or raise a new funds. Together with pre Initial public offering Business Plan, Company EYE helping of choosing the right lawyers, accountants, nominated advisers, public relations and other carefully selected companies that will deal with company floatation.
For more information go to Company EYE website.