Discuss IPO

Running Head : Discuss IPO

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Initial Public Offering

It is the offer of a company 's security (shares ) to the public which were previously not traded in the stock exchange . These shares are offered to the public through the stock exchange . The shares to be offered are usually previously held by private investors or promoters

Steps in an IPO

Initial public offering is a complex process that involves a lot of institutions and therefore before considering IPO , the be determined . Performing a cost

benefit analysis could help determine the cost of the IPO

The steps in an IPO include

The hiring of a manager who will ensure the effective running and management of the IPO . The manager usually is an investment banker There are many investment bankers in the market and therefore the company should choose those who have a proven track record of managing successful IPO 's . Of course this comes with an extra cost . Affordability and service delivery is important here

After the selection of the investment banker , the company then starts to perform a due diligence . This is where the investment banker examines the company and its books in to determine the value

This process involves a team of Accountants , Lawyers and Marketers who are involved in the preparation of the company 's main document the prospectus (S-1 . After the preparation of the prospectus , the Lawyers this document with the securities exchange commission (SEC . The preparation of this document usually should be thorough and done within a short duration because the SEC usually gives a time line for its preparation

After the SEC approves the prospectus , then the company should market the IPO

by advertising , holding seminars and road shows . This is important because the investing

public should be aware of the impending IPO . The company may target institutional investors who have a lot of money usually fund managers or retail investors

After the marketing , then the securities are offered to the public through brokerage firms available in the market

Advantages of IPO

An IPO allows the company to have a wide access of capital in the stock market by a company issuing more shares or bonds . Shares traded in the stock exchange are liquid and therefore the investors can easily sell off their shares if they so wish as compared to a private company where an investor has to first sell to existing shareholders

Companies listed in the stock market also have the publicity through electronic and print media , which enhances their image . Usually the public has higher regard on listed companies than private companies . Due to their enhanced image , companies listed can therefore acquire or merge with other companies in the market with ease

Companies listed can also entice top cream employers and management by offering them employee share ownership plans (ESOPS

Advantages of Debt

The greatest advantage of using debt capital has to be that of tax savings - Interest on debt is tax allowable hence the company can...