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Initial Public Offering (IPO) Process

What is an IPO?

An IPO or Initial Public Offering refers to the sale of a company’s common stock to the public. Unlike the stock that is bought or sold by the company, any money that is gained due to an IPO will directly go to the company. The main reason why a firm may sell its common stock to the public is to raise capital for the purpose of mergers or acquisitions. Sometimes, depending on the goals that the firm has for the future, it may also consider merging with a company that has already sold its stock to the public. Read below to find answers from Experts about IPO.

Would a start-up business qualify for an Initial Public Offering?

In most situations, a start-up business may not qualify for an IPO. One may find more information regarding this on the following link: http://www.sec.gov/answers/ipo.htm

What is a direct public offering?

A Direct Public Offering or DPO is a process by which a corporation can issue its stock directly to the investors without taking the help of a broker or an underwriter. This method helps the corporation to save on many costs that may be involved when going public through an IPO. A direct public offering is like an exempt security. A corporation that chooses a DPO may be exempt from a lot of registering and reporting requirements of the Securities and Exchange Commission. However, one of the main drawbacks of a DPO is that corporations that use this method may not have a secondary market to trade its shares. As a result, many investors may be varying of investing their money into DPO corporations.

Are there any bulletin boards or exchanges where the stocks of a DPO can be traded?

Unlike an initial public offering, there may be no bulletin boards or exchanges where the stocks of a DPO may be traded.

Can small investors get a part of IPOs?

It may be difficult for small investors to invest in and get a part of IPOs. This is because small investors are not the target audience of IPOs most of the times. If the underwriters who handle the process think that it will be successful, they will only contact companies that have shares at the price of the IPO. One of the ways a small investor can get a part of the IPO is if he/she has an account with the investment bank that is on the list of the underwriter.

Can an individual invest in an IPO with only $500?

In most situations, $500 may be a very small amount to invest in an IPO. In such cases, the individual may wait till the stock of the company starts trading. He/she may then buy stock worth $500 from the company.

How would an IPO affect a drag option?

Most of the times, the drag option rights of an investor may be terminated once the initial public offering process begins.

Companies may choose to go for an IPO for various reasons. Though an IPO may not directly affect small investors, it can have an effect of the stock price of the company, which in turn may be of interest for these investors. The process of IPO can be a complicated one which is difficult to understand. This may give rise to various questions among investors. You may ask an Expert if you do not understand anything about the IPO process or need more information about it.

Ask a Financial Professional

Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: General
Satisfied Customers: 2149
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
43581946
Type Your Finance Question Here...
characters left:
2 Financial Professionals are Online Now

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Financial Professionals are online & ready to help you now

Rakhi Vasavada
Financial and Legal Consultant
Satisfied Customers: 2073
Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Manal Elkhoshkhany
Tutor
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More than 5000 online tutoring sessions.
Megan C
Certified Public Accountant (CPA)
Satisfied Customers: 1755
Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level

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