Latest IPOs - Initial Public Offering Calendar

Initial Public Offering(IPO) FAQs

1. What Is an Initial Public Offering (IPO)?

An initial public offering (IPO) is the process of offering shares of a private company to the public for the first time in a new issue of stock, sometimes referred to as "going public". The primary purpose of an IPO is to raise capital for a company. After an IPO, the company gains access to investment from the entire investing public and receives more favorable credit due to increased transparency.

2. Why Does a Company Issue an IPO?

Companies go public for a number of reasons, and these reasons can be different for each company. Some of the reasons include:

• To raise capital and potentially broaden opportunities for future access to capital.
• To increase liquidity for a company’s stock, which may allow owners and employees to sell stock more easily.
• To acquire other businesses with the public company’s stock.
• To attract and compensate employees with public company stock and stock-options.
• To create publicity, brand awareness, or prestige for a company.

3. What Are the Pros and Cons of an IPO?

Pros:

• Access to capital: An IPO can provide a company with access to a large pool of capital that can be used to fund growth initiatives, pay off debts, or invest in new projects.
• Publicity and prestige: Going public can help raise a company's profile, reputation, and public image, which can improve profits and reduce the cost of borrowing capital.
• Liquidity: An IPO creates a market for the company's shares, allowing existing shareholders to sell their shares and realize a return on their investment.
• Attract talent: Being a public company can make it easier to attract and retain top talent by offering stock options and other equity incentives.
• Capital structure: An IPO can improve a company's capital structure and increase its risk tolerance.

Cons:

• Cost and complexity: Preparing for an IPO is a complex process that requires significant time and resources. The company must comply with regulatory requirements and hire underwriters, lawyers, and accountants to manage the IPO process.
• Increased scrutiny and disclosure: Public companies are subject to increased scrutiny by shareholders, analysts and regulators. The company must disclose financial information, including quarterly earnings reports and annual reports.
• Loss of control: Going public can dilute the ownership of existing shareholders. Owners may lose some flexibility in managing their company's affairs, particularly when public shareholders must approve the company’s actions.
• Short-term focus: Public companies are often under pressure to deliver quarterly results and meet shareholder expectations, which can lead to a focus on short-term performance rather than long-term strategy.

4. Largest IPOs

The world's largest IPO is Saudi Aramco - $29.4 billion (2019): Saudi Arabian oil company Saudi Aramco became the world's largest initial public offering in history when it went public on the Saudi Stock Exchange in December 2019, raising $29.4 billion.

The second largest IPO was Alibaba Group Holding Ltd. - $25 billion (2014): Chinese e-commerce giant Alibaba made its debut on the New York Stock Exchange in 2014, raising $25 billion in what was then the largest IPO ever.

5. Initial Public Offering (IPO) Process

The Initial Public Offering (IPO) process can be complex and involves several steps. The following is a general overview of the IPO process:

Step 1: Select an Underwriter: The company seeking to go public typically hires one or more investment banks to underwrite the IPO. The underwriters help determine the offering price, prepare the necessary documents, and market the IPO to potential investors.

Step 2: Conduct Due Diligence: The company and its underwriters conduct extensive due diligence to ensure that all required disclosures are made in the IPO prospectus. This includes reviewing financial statements, legal documents and other materials.

Step 3: Filing with Regulatory Agencies: The company files the necessary paperwork with regulatory agencies, such as the Securities and Exchange Commission (SEC) in the United States, to register the IPO.

Step 4: IPO Pricing: After the IPO is approved by the SEC, the effective date is set. The day before the effective date, the issuing company and the underwriter decide on the offering price and the exact number of shares to be sold.

Step 5: Stabilization: Stabilization refers to the underwriter taking direct action to stabilize share prices once the IPO launches. This is something that underwriters can do during the 25-day window after an IPO goes public, also known as the quiet period.

Step 6: Transition to Market Competition: The company's shares begin trading publicly on a stock exchange, such as the New York Stock Exchange or Nasdaq. The underwriter may continue to act in an advisory capacity, but at this point it can no longer influence pricing.

6. Can Individual Investors Take Part in an IPO?

Individual investors can purchase IPO shares directly through a brokerage account or by investing in small-/mid-cap growth mutual funds. It is important to note, however, that the ability to obtain shares of a newly issued security may be significantly limited because the total demand for the IPO may far exceed the actual supply of shares coming to the market. After the IPO is issued, the shares will begin trading in the marketplace shortly thereafter. Most investors will be able to access these shares more easily.