“Going Public is like planning a child. Once
the idea catches hold, it just grows and
grows. Your life becomes more complicated.
It will cost you a lot of money. And….it can
be a very, very rewarding experience”
The main purpose of the report is to provide a basic idea of Initial Public Offering (IPO). In this report we try to find out, what are steps a company has to go through for IPO, according to the Security Exchange Commission (public issue rules 2006).
At beginning of this report we give a little idea about IPO, then we descried why company go for IPO, after then we go through the IPO process step by step, and finally we draw a flowchart of IPO process with time allocation.
Generally companies go for IPO to raise capital and other reasons are liquidation of the shares of the company, expansion of the company into new territories or markets, expansion of the company either by acquisition or merger, and levergaing future sales or business to create extra value for the company. Base on the SEC consent we can divide the IPO process in two parts; one is work before Consent and another in work after consent. Work Before Consent consists of Selection of Advisors, Completion of Valuation and restructuring, Selection of Bankers to the Issue, Selection of underwriters, Collection of NOC from Lenders, Audit of Accounts, Credit Rating Report, Agreement with CDBL, Approval from Sponsors, Refund warrant guarantee, Draft Prospectus, Consent from SEC, and Application Submission. And Work After Consent consists of Submission of prospectus, Announcement for the investor, Provide full prospectus, Subscription period, Application for listing, Transaction rate, In case of under subscription, Application to Stock Exchanges for Listing, and Approval of listing.
At the end; Flowchart will give an idea about the time requirement for overall IPO process.
Initial Public Offers (IPO), also known as public offering, is basically the first sale of stock to the public by a private organization. IPO usually issued by those companies, who ask for capital to grow. Going public provides an opportunity to raise capital for the companies, while opening many financial doors as well. The reasons for IPO other than raising capital are:
1. Liquidation of the shares of the company so that the founders and the rest of the existing shareholders will be able to "cash out" and trade their shares for cash or other traded stocks (referred to as "exit event").
2. Expansion of the company into new territories or markets may require the company to become public, not only by means of more funding, but also by regulatory or marketing reasons. Being public is associated with credibility and accountability.
3. Expansion of the company either by acquisition or merger. Getting more money into the company allows the company to have more money to finance takeovers or mergers with other companies. Moreover, being public will allow the company to merge with private companies who want to become public without going through IPO (referred to as "reverse merger").
4. Levergaing future sales or business to create extra value for the company. In some cases, it is possible for a company to gain more money by pushing up the price of its traded shares more than by actual sales or business events. In the "happy dot com days" companies would buy other companies just because it created a good hype to their stock, eventhough the acquired company was closed shortly after that.
The IPO Procedure, a company that is thinking about going public should start acting like a public company in advance of the desired IPO. There are some instructions issuing companies have to follow to get consent from Securities Exchange Commission for IPO and these instructions are mandatory for issuing companies.
Base on the SEC consent, we can divide IPO procedure in two...