What is the IPO Process?

The Initial Public Offering IPO Process is where a previously unlisted company sells new or existing securities and offers them to the public for the first time.

Prior to an IPO, a company is considered to be private – with a smaller number of shareholders, limited to accredited investors high net worth individuals and/or early investors (for instance, the founder, family, and friends).

After an IPO, the issuing company becomes a publicly listed company on a recognized stock exchange. Thus, an IPO is also commonly known as “going public”.

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Overview of the IPO Process:

This guide will break down the steps involved in the process, which can take anywhere from six months to over a year to complete.

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Below are the steps a company must undertake to go public via an IPO process:

1. Select a bank/ Lead Manager

2. Due diligence and regulatory filings

3. Pricing/ Valuation

4. Stabilization

5. Transition

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Metrics for judging a successful IPO process:

The following metrics are used for judging the performance of an IPO:

 

Market Capitalization: The IPO is considered to be successful if the company’s market capitalization is equal to or greater than the market capitalization of industry competitors within 30 days of the initial public offering. Otherwise, the performance of the IPO is in question.

 

Market Capitalization = Stock Price x Total Number of Company’s Outstanding Shares

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Market Pricing: The IPO is considered to be successful if the difference between the offering price and the market capitalization of the issuing company 30 days after the IPO is less than 20%. Otherwise, the performance of the IPO is in question.

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YouTube Video Link:

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Urdu:  https://youtu.be/hGC7PRwLU-I

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