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Ipos Explained Simply

In: Business and Management

Submitted By ogearty
Words 887
Pages 4
To: Elizabeth Porto
From: Owen Gearty
Date: 7 April 2014
Subject: Initial Public Offering

When a company wants to raise money to further fund its operations it can do so through an Initial Public Offering, or IPO. A private company can choose to sell shares in its company to interested investors, but first the value of a company’s shares must be evaluated. When a company decides to go public it needs to hire an underwriter, or investment bank.
The owner of the company must file an S-I with the Securities and Exchange Commission, or the SEC. An S-I filing is comprised of extensive financial data, legal issues, management background, and various other details about the company. The S-I is a way to show how the company is doing and is made available by the SEC to anyone interested in this company.
After the S-I has been filed the company goes on a “road show” in which it actively seeks out interested investors as a way to build support and build hype for the company. Once the S-I filings have been approved by the SEC the company goes public and the company can sell its stock to raise the money it wanted. The company will also pick a trading symbol depending on the stock exchange it chooses to be traded on.
But how many shares will be issued, and what price will the stock trade at? When a company is going public it announces how many shares will be sold and gives an estimated price for these shares. The amount of shares is determined by the company and its investment bank, and is based on how much money needs to be raised, and how much of the company it wants to be owned by the public. Many company owners are wary of selling too many shares of their company for fear of losing majority control. EBay recently agreed to sell 20% of PayPal to the public after a long fight with activist investor Carl Icahn, who wanted them to sell the whole company to the

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