the initial public offering -ipo

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The IPO – Initial Public Offering What Is an IPO The Process The Myth

Post on 15-Jul-2015

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  • The IPO Initial Public

    OfferingOffering

    What Is an IPO

    The Process

    The Myth

  • WHAT IS AN

    IPO?

  • IPO stands for Initial Public Offering.

    An IPO is the first time a company introduces

    their stock to potential stock investors.

    An IPO is the first chance that stock investors

    get to purchase stock in that company.get to purchase stock in that company.

  • A new product being

    introduced to the public

    for the very first time

    such as a new model car,

    new model computer, or

    An IPO is similar to:

    new model computer, or

    newly built house.

  • THE PROCESS

  • 1. A privately held company wants to expand and needs financing. They decide that stock is one way that they can raise money.

    2. They determine the amount they need to raise, which will determine how many shares to issue.

    3. They hire an investment bank to buy and sell shares

    The process goes like this:

    3. They hire an investment bank to buy and sell shares to the public.

    4. They sell shares to investment bank.

    5. The proceeds (funds) from the shares to the investment bank are used by the company to finance operations.

    6. The investment bank sells shares to general public.

  • New Stock Offering - IPO

    Corporation receives cash

    from investment bank.

    Corporation sell shares to

    investment bank.

    Investment bank sells

    shares to investors.

    Corporation

    Investment Bankfrom investment bank. shares to investors.

    Investment Bank receives

    cash from Investors.

    At this point the stock is

    in the market or in the

    public.

    Investor

  • New Car Model Introduced

    Car dealer receives new

    models.

    Car manufacturer sells new

    models to car dealer.

    Car Dealer sells new car

    model to consumer.Car Dealership

    Car Manufacturer

    models. model to consumer.

    Car Dealership receives

    cash from consumer.

    At this point the new car

    model is in the market

    or in the public.

    Consumer

  • New Stock Offering IPO (A Second Look)

    Corporation receives cash

    from investment bank.

    Corporation sell shares to

    investment bank.

    Investment bank sells

    shares to investors.

    Corporation

    Investment Bankfrom investment bank. shares to investors.

    Investment Bank receives

    cash from Investors.

    At this point the stock is

    in the market or in the

    public.

    Investor

  • LOOK AT HOW

    STOCK & CARS

    CHANGES

    HANDS AFTER HANDS AFTER

    THE IPO

  • InvestorInvestment Bank

    or Stock Broker

    How STOCK changes hands after the IPO

    Notice that the corporation is not in the equation. Stock is

    sold by investors to investors through an investment bank

    or stock broker.

  • Consumer Car Dealership

    How CARS change hands after they are introduced

    Notice that the car manufacturer is not in the equation.

    The car is sold by consumers to consumers through a car

    dealership.

  • THE MYTH

  • Myth:

    People think that companies receive money

    from stock after the IPO. This is absolutely not

    true. The only time companies get money

    from stock after the IPO is:

    when they issue another stock offering when they issue another stock offering

    or secondary offering

  • Let me explain:

    A company issues 5000 shares to raise $1

    million during an IPO. At this point there are

    only 5000 shares out in the public. After a

    couple of years the company decides they

    want to expand so they issue 5000 more want to expand so they issue 5000 more

    shares to raise (secondary offering) another

    $1 million. At this point they have raised $2

    million from two separate stock offerings and

    have 10,000 shares outstanding....

  • In Summary:

    IPO is the first time a company introduces

    their stock to the public.

    Companies use a investment bank to get

    shares to the public.

    Companies do not receive any money from Companies do not receive any money from

    their stock after the IPO.