The IPO Process in USA
Initial Public Offerings (IPOs) are an important step in the life of a company. The process of going public in the United States involves several critical events and points-in-time (Ashford, K. & Schmidt, J., 2021).
The first step is the filing of a registration statement with the Securities and Exchange Commission (SEC). This document contains the company’s financial information to be shared with potential investors. The company must also provide prospectus documents to potential investors. The SEC then reviews the registration statement, which can take weeks or months, depending on the complexity of the transaction(Ashford, K. & Schmidt, J., 2021).
Ashford, K. & Schmidt, J., (2021) explained, after the SEC review and approval, the company selects an investment banker to act as the underwriter of the offering. The underwriter will conduct due diligence to assess the company’s financial and operating condition. They will also price the offering and create a marketing plan to attract investors.
The next step is the roadshow, during which executives and the underwriter travel to meet with potential investors to discuss the company and the offering. The roadshow typically lasts several weeks and culminates in the setting of the final offering price(Ashford, K. & Schmidt, J., 2021).
After the roadshow, the company will file a final prospectus with the SEC, and the offering will be open to the public. The offering price is usually set at the end of the roadshow and announced publicly that day. The offering will then be available for purchase from the participating brokers (Ashford, K. & Schmidt, J., 2021).
According to Crouhy, M., Galai, D., & Mark, R. (2001), the offering can be completed in as little as a few days, or take several weeks depending on the size and complexity of the transaction. If the offering is successful, the company will have raised capital and become a public company.
In conclusion, the IPO process in the US is a lengthy process with several critical events and points-in-time. Companies must first file a registration statement and prospectus documents with the SEC and select an investment banker to act as the underwriter. After the SEC reviews the documents, the company will embark on a roadshow to meet with investors and set the offering price. Finally, the offering is open to the public and the company can raise capital and become a public company.
References
Ashford, K. & Schmidt, J. (2021, August 21). What is an IPO? Forbes Advisor. Retrieved December 20, 2022. From https://www.forbes.com/advisor/investing/initial-public-offering-what-is-an-ipo/
Crouhy, M., Galai, D., & Mark, R. (2001). The essentials of risk management. New York: McGraw-Hill.
Note:
This article is written based on University of The People Financial Management (BUS 5111) written assignment by Fristy Tania in December 2022
