What is an IPO?
When shares of a company are first sold to the public AKA “Going Public”.
Why Go Public?
- Raise cash
- Attract awareness and interest
- Gain credibility
- Increase liquidity (easier to sell or convert ownership to cash)
- Attract top talent
IPOs are highly anticipated for both investors, who see growth and want to invest and for the company’s owners, who will get a payout for giving up a piece of the business.
- Shares sold on exchange to outside investors
- Stock traded on an exchange
- Company financials are public
- Must file with The SEC (The Securities & Exchange Commission) and comply with regulations
- Majority owned by founders, family, or key employees
- Stock not for sale to general public
- Company financial information private
- More flexibility and maneuverability with less regulations
How to get ready for an IPO
- Hire a brokerage firm
- Meet with investment banks
- Secure top-notch talent from company and board
- Meet with public investors to produce business to research analysts
- Make sure financial projections are reasonable
- The largest IPO on record was Alibaba, which was valued at $25 Billion in 2014
- Facebook’s initial IPO price was at $38 per share, but the stock fell as soon as it opened and now it’s worth over $100!