Initial Public Offering Procedure : NobleTrading Blog

Friday, September 4, 2009

Initial Public Offering Procedure

Initial Public Offerings (IPOs) are always considered good trading and investing opportunities. IPOs are also the key step, from which a company's financial info and growth potential are made available to the public. An initial public offering procedure is as follows:

The very first step is the company registration. All public traded companies need to register with the concerned regulatory body; in the USA it is the Securities and Exchange Commission (SEC).
The registration demands filing public offering and other legal documents. The company prospects are to be made publicly available. The prospects should include details such as present company financials, company management, stock owners, growth potential and potential risks.
After the registration, the company needs to tie up with investment bank(s) for the distribution of their shares.
The next step is the price setting. Both the company and the investment bank come together to set a price. The price can be of lowest IPO price (traditional IPO), highest price (Dutch Auctions IPO) or of a price range.
The price is set based on the company's financial stability, past performance, growth potential and market willingness.
After that the stocks are made available to broker clients and are then publicly offered to retail investors/traders and institutional clients.
The stock is also registered in a centralized stock exchange (like NYSE), where it is then traded publicly on demand and supply basis.