What is an IPO?

IPO (Initial Public Offering) - public saleof shares (first) of the issuing company. This is the first appeal to investors with a view to encouraging them to become shareholders of this company. Also, this term may mean a secondary placement of a stake in the company on the market, which does not distort the meaning of the term. IPO is an opportunity to purchase shares of the company in the primary market with securities (the secondary market is the exchange). An IPO can be implemented in two ways:

• Secondary Public Offering (SPO) is a secondary (or repeated) public offering of the company's shares from the main issue (which at that time the shareholders themselves own);
• Primary Public Offering (PPO) is a "classic" option when future investors are invited to buy shares of an additional (or new) issue.

The issuing company can also conductadditional placement of shares (except for primary placement), that is, follow-on (or additional placement). They also talk about PO (public placement), but this is not an initial placement.

Stages of IPO

What is an IPO we figured out. Now consider the stages of its implementation, because in order to obtain maximum effect from such a public first sale of shares, the company simply needs a series of measures to prepare it.

• The preliminary stage is an assessment of the financialthe activities of specific companies, whose goal is to find weaknesses that can scare off future investors. The company strengthens its financial position and improves performance. When this is done, you can begin the preparation itself;
• The preparatory stage consists of several steps:
  1. Search of partners with whom the plan of carrying out, listing, a choice of a platform for the future tenders will be coordinated;
  2. Creation of a document called "investment memorandum", which provides all the information necessary for the investor (the dividend policy of the firm, the price of its shares, and so on);
  3. Formulation of formal documents;
  4. Launch an advertising company. Also, the behavior of advertising trips to major cities for the company's presentation. There is an acquaintance with future investors and much more. All this is aimed at forming the so-called "book of applications".
• Then follows the main stage, which includes the collection of applications for securities. At the same time, prices are set, taking into account received applications, the satisfaction of these applications and summarizing;
• The last stage will show the effectiveness of such placement. At this stage, look at the dynamics and volume of trades, as well as other important parameters.

Now you know what an IPO is, and what its stages are!