IPO Secrets

What Is An IPO? The term "IPO" is an acronym for "initial public offering".

An initial public offering is a company's first sale of stock to the general public.

This is the first time that the company has enabled the general public to become

shareholders in the company. This is what the Wall Street phrase "going

public" means.

A company will go public in order to raise money. When the company

executes the IPO, their stock will be listed on a stock exchange for the first

time. The general public will then have the opportunity to buy the stock and

become shareholders in the company. The company will then use this

money for the benefit of the company. They may use it to pay off debt,

build new plants, increase their workforce, or a variety of other things.

When a company decides to go public, they will hire a brokerage firm to

handle the IPO. Sometimes there will be more than one brokerage firm

handling an IPO for a company. The brokerage firms are known as the

underwriters for the IPO. It is their job to sell the new stock to the public. If

there is more than one brokerage firm handling an IPO for a company,

then each of the brokerage firms will have a certain allotment of shares that they

have to sell.

The brokerage firms will write up a prospectus that provides more

details about the company. This may include information about the

company's financial statements, management team, the history of the

company, what they plan on using the money for, and a variety of other

details about the company. The brokerage firms will use the prospectus as

a sales tool.

With their prospectus in hand, the brokerage firms will make the rounds

pitching the IPO to institutional investors. Institutional investors include

mutual funds, hedge funds, and pension funds. They have large amounts

of money at their disposal. That is where the big money is for the

brokerage firms. The brokerage firms want to sell as much of the stock as

they can. They know that...