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    Initial Public Offerings

    An initial public offering (IPO) is the first time that a company offers their shares for sell to the public, subsequently making 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 and the ability to list on more prestigious exchanges. The transition to an IPO may also increase the company’s reputation and the liquidity of its assets. If successful, the company 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 and would like to harvest or are looking to expand. An IPO will ultimately minimize an issuer’s losses through funds raised through the offering before it begins to lose significant money.

    IPO Process

    In conducting an IPO, issuers partner with investment banks (IBs) to discuss important details surrounding the offerings. 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.

    Facilitate regulatory compliance and smooth workflow

    Ensure that your attorney, transfer agent, investment bank and other vendors are working effectively with the company to ensure proper regulatory compliance and smooth workflow

    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 effects of going public as experienced from the media, SEC, and industry competitors

    Investment Bank 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 securities after they are listed. 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 to help compensate. 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 a secondary offering following the lockup period, a common exit strategy for struggling IPOs.


    IPOs are long processes, at times taking six months or more to complete. However, Issuer Consulting helps guide you through each step of the complicated process, allowing you to complete it smoothly.  Benefits include:

    • Help you determine whether your company requires full firm commitment from an IB or “best efforts” (i.e., advertising, share distribution)
    • Facilitate regulatory compliance and smooth workflow between you and your vendors
    • Help you negotiate IPO terms including share price, etc.
    • Ensure that you are in contact with potential investors pre-IPO
    • Act as your CFO consultant, or help you find an experienced CFO, essential to complete your IPO
    • Review how to manage your company and optimally recoup losses if you’ve conducted an unsuccessful IPO
    • Help you navigate the waters of being public including new offerings, SEC filings, managing investors, roadshow conferences, etc.

    Along with an IPO comes a significant change in routine for employees and issuers alike. The public is continuously watching your company and scrutinizes your everyday actions. Additionally, the company’s information, as well as personal information, may be less secure.  To assist with this, we can consult you through the IPO process and help you and your company adapt to the changing public environment.

    If you have any questions,

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