Initial Public Offerings

IPO Basics

An initial public offering (IPO) is the first time that a company makes their shares publicly tradable on an exchange. These offerings are sometimes referred to as unseasoned offerings, in which companies publicly issue shares for the first time. Companies that desire to go public and consequently raise more capital for their business can choose to conduct an IPO. This expands their reach to the public by increasing the number of potential investors in the company’s stock. Having more investors provides companies with more opportunities to raise capital. The transition to an IPO may also increase your reputation and the liquidity of your assets. If successful, you will catch the attention of many other companies on publicly traded markets.

Lastly, IPOs are common exit strategies for companies that either have met their financial goals or are declining. An IPO will ultimately minimize an issuer’s losses before he begins to lose significant money.


IPO Process

In conducting an IPO, issuers partner with investment banks (IBs) to discuss its details. This discussion involves the amount of shares they will sell and the IPO’s price. It is rare that 100 percent of a company goes up for sale as a result of an IPO; rather, investment banks will discuss with issuers the percentage of their company that they want to make available to the public. Investment banks earn money due to the underwriting spread (typically around 10 percent). Underwriting spread is the difference between what IBs sell your stock publicly for and what money goes to the company as a result of the sale. This won’t always result in a net gain for the IB. They will facilitate the transition to public by valuing issuers’ stock and helping them find investors.

IB Capabilities

By law, IBs are not allowed to make arrangements with prospective investors prior to going public. They do, however, have investors who can purchase your newly listed securities. Selling to these investors will dilute ownership of the existing shareholders, which companies usually would not want. However, investment banks will often sell your company’s stock at a higher price than you can. They can further help you manage mispricing risk, the risk that your securities are selling for less than their full value.


When going public, it is also important to be aware of the listing rules of public exchanges such as the NYSE and NASDAQ. These exchanges have requirements ranging from number of shares and minimum market cap to overall earnings. After the shares are public, IBs often prevent issuers from selling shares via a lockup provision; the price of shares tends to be volatile immediately following an IPO. Investors may choose to conduct secondary liquidity following the lockup period, a common exit strategy for struggling IPOs.


IPOs are long processes, at times taking a year or more to complete. However, Issuer Consulting helps guide you through each step of the complicated process, allowing you to complete it smoothly. We

Ensure your regulatory compliance

Ensure that you comply with all of the IPO documents, forms, and policies required by the SEC, including Regulation S-K

Discuss and negotiate IPO specifics

Discuss share price, the amount of shares to sell, reputable investment banks to partner with during the IPO process, and more

Help you adjust to the public environment

Help you manage the added scrutiny from the media, SEC, and other competitors that comes with transitioning to public

Additional Benefits

Issuer Consulting also assists you with other aspects of the IPO process. The rest of our benefits are below. We:

  • Help you determine whether your company requires full firm commitment from an IB or “best efforts” (i.e., advertising, share distribution)
  • Review how to manage your company and optimally recoup losses if you’ve conducted an unsuccessful IPO
  • Act as your CFO consultant or help you find an experienced CFO, essential to complete your IPO
  • Confirm that you comply with the SEC’s Regulation S-K, which outlines benefits that issuers grant to shareholders which require proper documentation
  • Ensure that you are in contact with potential investors pre-IPO

Along with an IPO comes a significant change in routine for employees and issuers alike. The public is always watching your company and the media closely scrutinizes your everyday actions. The company’s information, as well as personal information, may be much less secure. In addition to consulting you through the IPO process, we help you and your company adapt to the changing and, at times, hostile public environment.

If you have any questions,

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