What The Heck Is An IPO

Have you ever thought about how a company is publicly traded? How does it all begin? It all begins with the IPO. These are some of the steps you would need to take if your wanted your company to be publicly traded.

Many entrepreneurs hope one day they will build their company into a successful brand that can be publicly traded on a stock market. Essentially that is what an IPO, or Initial Public Offering, is. It is the process where a privately held company becomes a publicly traded company with the initial sale of its stock. Even after an IPO, publicly traded companies can revert back to being private entities if they so choose.

Essentially, an IPO is a tool that companies use to secure capital through investments for future use. In most instances, this investment is used to expand or improve their business, purchase assets, or provide a dividend to investors. Once a company has decided to have an Initial Public Offering, there are a number of steps involved. Let’s take a look at those steps:

  • First, the company will choose an underwriter. An underwriter is usually a bank, or multiple banks, that help the company put together their prospectus. Underwriters are also in charge of getting the security out to the public. The prospectus is actually written twice, an initial prospectus and a final prospectus. The initial prospectus is often referred to as a red herring. The red herring usually lists secondary information about the company, but not important info like IPO stock share price and the number of shares available.
  • Next, the final prospectus is filed with the Securities and Exchange Commissions, the company and underwriter set a date for the Initial Public Offering.
  • Finally, the IPO occurs.

While there are many things that go on while preparing for the IPO, these are the basic steps. Preparing for an IPO takes a lot of work and is a very exciting time for a company. As an entrepreneur myself, I hope one day to take my brand to the next level and offer it as a publicly traded company. For more on investing, be sure to sign up for my FREE 5-day course for beginners #Slayinvest

 

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on What The Heck Is An IPO

  1. Neely
    January 17, 2018 at 10:53 am (3 months ago)

    Honestly I had no idea so this was super interesting to me! I love learning new stuff

    Reply
    • tracie45
      January 17, 2018 at 1:44 pm (3 months ago)

      I love learning new things as well Neely! I have found that many people don’t know the investing lingo so I plan to do more posts about the investing lingo. This year on my blog I will be focusing on investing. I sure would like it if you continue to read. Thank you for reading and commenting!

      Reply
  2. Nellwyn
    January 17, 2018 at 10:57 am (3 months ago)

    This is really helpful since I’m starting to learn more about investing this year. It’s so good to have a better understanding about how the market works.

    Reply
    • tracie45
      January 17, 2018 at 1:42 pm (3 months ago)

      Thank you Nellwyn, I am glad that you found value in my post. I am focusing on investing this year on my blog and sure would love it if you continue to read. Thank you for reading and commenting!

      Reply
  3. Brandy
    January 17, 2018 at 2:33 pm (3 months ago)

    I had wondered before about this, although I watch Shark Tank and The Profit enough to where I start to learn new terms. Great that you are sharing what IPO means, it will be helpful to use entrepreneurs out there!

    Reply
    • tracie45
      January 17, 2018 at 7:45 pm (3 months ago)

      Brandy, I love Shark Tank! I will have to check out The Profit, thanks for sharing that. Thank you for reading and commenting!

      Reply
  4. Steveark
    January 17, 2018 at 2:53 pm (3 months ago)

    Back when I worked a 9 to 5 my company spun off some of it’s assets into a Master Limited Partnership, a MLP, and employees were allowed to buy shares before the Initial Public Offering,IPO, at a set price. I invested all the liquid funds I could scrape up and made a 50% return on my invesetment in 90 days. Back then every single oil company MLP gave returns like that so it was low risk. But I never tried buying into an IPO for a company I didn’t know a lot about.

    Reply
    • tracie45
      January 17, 2018 at 7:47 pm (3 months ago)

      Steveark, I love when companies release bonus shares! Being in the company and being a shareholder of the same has its rewards.

      Reply
  5. Marcie W.
    January 17, 2018 at 5:25 pm (3 months ago)

    Wonderful information regarding investments! Our small business is a private entity but I will be sure to mention this to our financial advisor.

    Reply
  6. christine
    January 17, 2018 at 9:18 pm (3 months ago)

    I am so clueless when it comes to things like this. I stare at my investment portfolio and am totally unable to decipher any financial talk. Thanks for the info on IPO

    Reply
    • tracie45
      January 22, 2018 at 5:27 pm (3 months ago)

      Oh my Christine! Don’t feel bad, I used to be just like you, until one day I decided I would learn all I could, as I felt like my broker was not effective. Thank you for reading and commenting.

      Reply
  7. Carrie | The Lavender Hytta
    January 18, 2018 at 1:51 am (3 months ago)

    This was great as its been so long since I talked about IPO… It’s hard to imagine that I graduated college 10 years ago and seeing as I have only worked in small businesses since then it isn’t something that I have actively remembered. Thanks so much for the refresher.

    Reply
    • tracie45
      January 22, 2018 at 5:29 pm (3 months ago)

      You are welcome Carrie. I have found with many of my clients, the lingo is just so confusing. Thank you for reading and commenting.

      Reply
  8. Scott
    January 18, 2018 at 10:26 am (3 months ago)

    I’ve participated in a number of IPO’s in my time, most notably eBay! They are a lot of work, but can be really worth the effort!

    Reply
    • tracie45
      January 22, 2018 at 5:33 pm (3 months ago)

      I got in on that Ebay IPO too Scott, and I am glad I did. You are right they are a lot of work but they are worth it. Thank you for reading and commenting.

      Reply
  9. Femme Frugality
    January 20, 2018 at 2:35 pm (3 months ago)

    Great info! My business is pretty much a solo venture, but if they changes I’ll have to look into this further. I know that as an average investor I’m unlikely to get in on the initial IPO, but haven’t ever considered it from the other side.

    Reply
    • tracie45
      January 22, 2018 at 5:34 pm (3 months ago)

      It certainly is worth considering, Femme Frugality. Thanks so much for reading and commenting!

      Reply
  10. Dana
    January 23, 2018 at 9:03 am (3 months ago)

    Great inforation! I didn’t know what it was, either.

    Reply
    • tracie45
      January 23, 2018 at 11:56 am (3 months ago)

      Great Dana, I am glad you were able to obtain value from this post. Thank you for reading and commenting.

      Reply

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