Introduction

When a company does well financially over some time, it comes to a point where the leaders

decide to raise more funds to increase or expand their financial position in the market. This is the

stage where funds generated from bank loans and bonds are not enough for the company and the

company decides to acquire money from the public by selling shares called stock of the company

(Managing Financial Resources, 2012). This paper discusses the Initial Public Offering (IPO)

process for such a company.

Analysis

Initial Public Offering (IPO) is the first stage that such a company goes through to become a

publicly traded company. It begins with the company writing their proposal and valuation of

their business, the type of security they have, the number of shares and price they are offering,

and the time they look forward to going public. This is done with the help and advice of the

company’s investment banker (Hayes, 2020). The company then forms a team of lawyers,

certified public accountants, and Securities and Exchange Commission experts who will finalize

the underwriting agreement. The result of the meeting is an S-1 Statement. According to Lee

(n.d.), this statement has “historical financial statements, key data, who are selling shares and

how many they’re selling, the company overview, risk factors, and more.” This S-1 Statement is

filed with the Security Exchange Commission (SEC) and the company waits for 30 calendar days

to get a comment from its legal them. The company now revises its S-1 Statements based on the

comments from the SEC. At the same time, the company goes through the Pre-IPO process

“where they educate bankers and analysts on the company and “teach” them how to sell it to

investors” (Hayes, 2020). The company now picks investors to market to and they determine the

final price of the shares to go on the stock market based on the final S-1 Statement
recommendations. The banks now allocate shares to investors who will be long-term holders of

the stock. After this, the company the public will wait for 25 days before the general public can

start buying shares on the stock (Hall, 2019).

Reference

Hall, M. (2019). What Are the Three Stages of the IPO Life Cycle? Retrieved from:

https://www.investopedia.com/ask/answers/06/ipoprocess.asp

Hayes, A. (2020). Initial Public Offering (IPO). Retrieved from:

https://www.investopedia.com/terms/i/ipo.asp

Lee, N. (n.d.). The Initial Public Offering (IPO) Process. Retrieved from:

https://www.mergersandinquisitions.com/initial-public-offering-process-ipo/

Managing Financial Resources. (2012). An Introduction to Business (Vol. 2, pp. 685-745).

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