What is an IPO and how does it work?

• What is IPO?

  An initial public offering (IPO), is a process by which a private company sells its shares to the general public. This can be a new company, in its infancy or an established company that decides to register on the stock exchange and from here goes public. Companies raise capital from public investors, by issuing public shares ownership. IPOs may also increase the company's reputation and exposure, which may increase its sales.

• IPO Process

  Once a company decides to issue its shares to the public, it chooses a lead underwriter to help with the securities registration process and distribution of the shares to the public.

  The lead underwriter then assembles a group of investment banks and broker-dealers (a group known as a syndicate) that is responsible for selling shares of the IPO to institutional and individual investors.

  The prospectus is intended to provide the public with all the information it needs to analyze the investment. The prospectus lists the company business with its financial results and shareholders. The day before the stock issue, the underwriter and company must set a starting price for the shares.

• The Stock Starts Trading

  Traders cannot take part in the IPO, which is reserved for institutional entities only. Following the IPO, the shares are traded on a stock exchange. The stock is usually open for trading in the first two hours after the IPO. Redpine Capital Ltd allows its customers to purchase shares at the time of the issue and at the issue prices, before entering public trading on the stock exchange. This is a unique benefit for the company's customers that opens to customers opportunities that are not given to other traders.

• Unique Opportunities

  The offering is a major attraction for institutions and private investors. The stock starts trading in an arena that has never been traded in. Issues tend to be very volatile on the day of issue and shortly thereafter when new investors join.