How to Place a Stock Up For Public Offering

An Initial Public Offering, or IPO, occurs when a company decides to raise more funds for an already established business. Investors will be invited to inject some of their own money and in return will be handed out shares, on which they will earn timely payments in the form of dividends.

Instructions

  • 1

    Determine your company’s eligibility. Before offering shares to the public, the business must be able to prove its profitability and must have a certain number of substantial assets. However, since there is no general criteria that clearly defines the process, it is important that you determine this by taking help from an investment bank or properly reviewing your financial statements. The latter factor will provide you with detailed information on where your company’s financial health stands, and whether it is able to attract investors.

  • 2

    Link up with an investment agent. The agent will figure out the amount you need to raise and at what prices the initial shares will be sold, or the percentage which will be made public. The investment back in effect, will work as an underwriter and will help you connect with potential investors. Only after that, your shares will be traded on the open market.

  • 3

    Make sure that you work with the investment bank and give proper presentations to entice potential clients. The process is usually referred to as ‘subscriptions’ where large investors will be brought on board, with their interests being kept in mind. The process will allow the company to determine whether going public will help them in expanding their business. Moreover, the backing of some of the big players will have a positive effect on the price you set on each share.

  • 4

    Comply with the Securities and Exchange Commission (SEC). SEC is responsible for ensuring that all federal laws are being met when a company decides to go public. At this moment, it is mandatory for a business to disclose all financial or company related information where they explain the terms of the IPO. This can be a two time process, one which will be exercised in the initial prospectus and then in the final draft. You will also need to choose a method on the form of offering you intend to make. This will depend on the size of the company and the industry your business belongs to.

  • 5

    The process will be now initiated by your investment bank, which will purchase your shares and sell them to interested investors. A commission will be charged before the shares are traded openly.

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