24374028 IPO Related Issues

8/8/2019 24374028 IPO Related Issues

1/23

IPO Related Issues

Abstract:

The purpose of this paper is to highlight Initial Public Offering related

issues.

When a company sells stock to the public for the first time it is calledan initial public offering. Once a company becomes public it has to

disclose so much information to public on regular intervals.

Implementation of any key decision takes time; the cost of the process

is very high and so many other issues. Then Initial Public Offering of

HBL is also discussed in this paper. It is concluded that a company

should consider the advantages and disadvantages of IPO before

deciding to go public. IPO related issues can be minimized by better

planning.

Introduction:

IPO stands for Initial Public Offering. As the name suggests its the

process wherein a company goes to public for the first time for raising

money by offering ownership in the company. In this process a private

limited company becomes Public Limited Company. Companies offering

an IPO are sometimes new, young companies, or sometimes

companies which have been around for many years but are finally

deciding to go public. IPOs are often used as a way for a young

company to gainnecessarymarket capital. When a company decides

to go public, it first hires an underwriter, usually a large investment

bank. The underwriter agrees to buy all shares of the companys stock

minus the investment's firm commission, usually about 5 to 7 percent.

After a successful offering, the underwriter meets with all parties to

distribute the funds and settle all expenses. At that time the transfer

agent is given authorization to forward the securities to the new

owners. An IPO closes with the transfer of the stock, but the terms of

2
http://www.investorwords.com/3390/offering.htmlhttp://www.businessdictionary.com/definition/initial-public-offering-IPO.htmlhttp://www.investorwords.com/2143/gain.htmlhttp://www.businessdictionary.com/definition/necessaries.htmlhttp://www.investorwords.com/5915/market_capital.htmlhttp://www.investorwords.com/3390/offering.htmlhttp://www.businessdictionary.com/definition/initial-public-offering-IPO.htmlhttp://www.investorwords.com/2143/gain.htmlhttp://www.businessdictionary.com/definition/necessaries.htmlhttp://www.investorwords.com/5915/market_capital.html


2/23

IPO Related Issues

the offering are not yet completed. The Security and Exchange

commission of Pakistan (SECP) requires the filing of a number of

reports pertaining to the appropriate use of the funds as described in

the prospectus.

What Is Stock Exchange?

A stock exchange is a forum for trading in securities representing

shares of firms. An exchange provides ways by which financing is

raised by the sale of shares to outside investors. Exchanges have two

clienteles: companies, which list their shares, and investors, who trade

on the exchange.

A stock exchange, share market or bourse is an organization which

provides "trading" facilities for stock brokers and traders, to trade

shares of the listed companies and other financial instruments such as

Term Finance Certificates and Derivatives. Stock exchanges also

provide facilities for the issue (listing), redemption (delisting) of

securities and other capital events including the payment of income

and dividends. Karachi Stock Exchange (KSE) is a modern market

where trading takes place with electronic trading system called Karachi

Automated Trading System (KATS), which gives the Exchange

advantages of speed and minimum cost of transactions. Trades on an

exchange are by members only.

What are Shares?

A unit of ownership interest in a corporation or financial asset. Each

shareholder is a partial-owner of the company in which they have

bought shares and investors can buy and sell their shares on the stock

exchanges. Companies on incorporation issue shares, (also called

equities) and later perhaps when they are building up a business. While

owning shares in a business does not mean that the shareholder has

direct control over the business's day-to-day operations, being

2


3/23

IPO Related Issues

a shareholder does entitle the possessor to an equal distribution in any

profits, if any are declared in the form of dividends. The two main types

of shares are common shares and preferred shares.

Common Shares

When we buy common shares we become a part owner of the

company. We will share in the profits of the company if it does well,

either by seeing the value of your shares rise, by being paid dividends

out of the firm's profit, or both. If the business performs badly, you

probably won't get any dividends and the value of your shares will

drop.

Preferred shares:

A preferred share is a special type of stock that regularly pays you a

set amount of money out of the company's profits called dividends.

They're called preferred because you get preferential claim to the

profits ahead of common shareholders.

Why Do Companies Go Public?

The primary purpose for companies to be publicly listed at the

exchange is to cost-effectively raise capital. It reduces the companys

reliance on the traditional financiers such as financial institutions and

individuals. The most common reason is that capital raised through an

IPO does not have to be repaid, whereas debt securities such as bonds

must be repaid with interest. Listing allows business expansion without

increasing borrowings or draining the companys cash reserves. History

of listed companies indicate that companies that convert to public

ownership are more likely to become successful than control

companies that remain private. Companies that go public are also

more likely to become acquirers than control companies. IPO

companies grow faster than control companies after going public.

2
http://www.investorwords.com/5954/securities.htmlhttp://www.investorwords.com/521/bond.htmlhttp://www.investorwords.com/5331/with_interest.htmlhttp://www.investorwords.com/5954/securities.htmlhttp://www.investorwords.com/521/bond.htmlhttp://www.investorwords.com/5331/with_interest.html


4/23

IPO Related Issues

However, both public and private companies must disclose financial

information to regulators.

IPO Process:

In order for a company to sell IPOs, it must get one or several

investment banks involved in the process. These banks are referred to

as underwriters and the company enters into a legally binding

agreement with the lead underwriter that gives it permission to sell

shares of the company to the public. Most IPOs are underwritten bywhat is referred to as a syndicate of investment banks, which are

several banks that are headed by one or several major investment

banks. The bank or banks leading the syndicate become the lead

underwriter. Once the company enters into an agreement with an

underwriter, the underwriter then offers shares to investors that may

be interested in purchasing them. Once the underwriter sells the IPO,

the company receives a commission that is based on a percentage of

the IPO's value. The underwriters selling the largest proportions of the

IPO usually receive the highest commission. In some cases, this can be

as much as 8%.

The underwriting process:

When a company wants to go public, the first thing it does is hire an

investment bank. Underwriting is the process of raising money by

either debt or equity. Underwriters are middlemen between companies

and the investing public.

The company and the investment bank will first meet to negotiate the

deal. Items usually discussed include the amount of money a company

will raise, the type ofsecurities to be issued and all the details in the

2
http://www.investopedia.com/terms/i/investmentbank.asphttp://www.investopedia.com/terms/s/security.asphttp://www.investopedia.com/terms/i/investmentbank.asphttp://www.investopedia.com/terms/s/security.asp


5/23

IPO Related Issues

underwriting agreement. In a firm commitment, the underwriter

guarantees that a certain amount will be raised by buying the entire

offer and then reselling to the public. In a best efforts agreement,

however, the underwriter sells securities for the company but doesn't

guarantee the amount rose.

Once all sides agree to a deal, the investment bank puts together a

registration statement. This document contains information about the

offering, company info such as financial statements, management

background, any legal problems, where the money is to be used and

insider holdings. Then underwriter and company attempt to hype and

build up interest for the issue.

As the effective date approaches, the underwriter and company sit

down and decide on the price. This isn't an easy decision: it depends

on the company, the success of the road show and, most importantly,

current market condition.Finally, the securities are sold on the stock

market and the money is collected from investors.

Issue Price:

A company that is planning an IPO appoints lead managers to help it

decide on an appropriate price at which the shares should be issued.

There are two ways in which the price of an IPO can be determined:

either the company, with the help of its lead managers, fixes a price or

the price is arrived at through the process ofbook building.

General Issues Before Going IPO:

Issues before going IPO are:

Access to IPO Markets:

Access to IPO markets, fundamentally, depends on the state of the

economy and equity market conditions at the time a company is ready

to undertake an IPO. If economic and market conditions deteriorate

around the time that a company wants and needs to go public, it is

2
http://www.investopedia.com/terms/f/firmcommitment.asphttp://www.investopedia.com/terms/b/bestefforts.asphttp://www.investopedia.com/terms/i/insider.asphttp://en.wikipedia.org/wiki/Book_buildinghttp://www.investopedia.com/terms/f/firmcommitment.asphttp://www.investopedia.com/terms/b/bestefforts.asphttp://www.investopedia.com/terms/i/insider.asphttp://en.wikipedia.org/wiki/Book_building


6/23

IPO Related Issues

very difficult to complete a successful IPO. A valuation acceptable to

the marketplace may not provide sufficient capital to the company and

could unduly dilute the ownership and valuations of existing

shareholders to the point where it is not feasible to undertake the IPO.

This could lead to immediate failure or prolonged problems for a

company.

Financial Position:

Over and above the timing issue, however, a company must prepare

itself internally to be ready to go public. Usually, a history of strong

earnings is required to make a company attractive to investors but

other factors such as management expertise, innovative new products

and a new business concept can allow a company to go public even

with little or no earnings. The key to any company's ability to

undertake an IPO is a strong, capable and experienced management

team and a prominent Board of Directors.

Growth Potential:

High growth potential is another key sign of readiness by either a

consistent record of high growth or, at least, the potential for high

growth. A company's position in an industry is often linked to holding

patents, copyrights, trademarks, and other proprietary advantages and

investors often look to these as evidence that the company can earn

higher than average profits and return on assets. Before going public, a

company should have strong tangible net asset holdings that would be

sufficient to get it through a difficult post-IPO environment.

Post IPO Issues:

2


7/23

IPO Related Issues

The issues brought about through the flotation of a company in an IPO

are typically perceived differently by different companies with different

focuses and requirements.

Potential loss of control

Increased disclosure of information

Costs of IPOs

Potential restrictions on management action

Emphasize on short-term performance

Decisions takes time

Potential Loss Of Control:

Not all IPOs are for more than 50 per cent of the issuers voting

shares, in fact, the average is around 30 per cent. So although control

is not lost through the IPO, if the company requires further equity to

fuel its growth, existing shareholders will suffer dilution. For the

majority of companies, control will pass to public shareholders at some

point in time. If a large portion of the company's shares are sold to the

public, the company may become a target for a takeover, causing

insiders to lose control. A takeover bid may be the result of

shareholders being upset with management or corporate raiders

looking for an opportunity.

Increased Disclosure Of Information:

When a company moves from private ownership to public, it vastly

increases the number of people who have access to its financial

records. Public companies release all operating details to the public,

including sensitive information about their markets, profit margins, and

future plans. This can be a huge shock to the existing owners, not just

the reporting of the companys results, but the disclosure of

2


8/23

IPO Related Issues

management salaries and perks that often piques the interest of

newspaper editors on a slow day.

Companies are required by stock exchanges, securities commissions

and regulators to disclose information on a regular basis so that

investors and potential investors can make buy, sell or hold decisions.

Costs Of IPOs:

Initial public offerings arent cheap. Investment bankers take

commissions of between 2 and 7 per cent of the total amount raised;

lawyers and accountants bill by the hour, and many hours are required.

The ancillary costs, such as public relations, printing, corporate

advertising and others can add several hundred thousand more dollars,

euros or pounds.

However, the direct costs of an IPO can pale beside the indirect cost of

under pricing. Because no cash is coming directly out of the issuers

pocket, under pricing can sometimes be ignored as a cost. It should not

be. IPOs around the world are under priced compared with their short-

term performance. On average, an IPO will close at a price that is 15 to

20 per cent above its issue price, although this varies by market and

industry and over time. This means that selling shareholders and the

company are leaving significant sums of money on the table when they

go public.

Potential Restrictions On Management Action:

In public companies, the managers are the agents of the shareholders

they should be acting on behalf of the shareholders and in the

shareholders best interests. In order to ensure that they do, public

companies have boards of directors who are meant to oversee

managements actions on behalf of shareholders. In some

2


9/23

IPO Related Issues

circumstances a strong board of directors may limit the actions of

management. Going public gives management less control over day-to-

day operations

Emphasize On Short-Term Performance:

Public entities also face added pressure to show strong short-term

performance. Earnings are reported quarterly, and shareholders and

financial markets always want to see good results. Unfortunately, long-

term strategic investment decisions may tend to have a lower priority

than making current numbers look good.

Decisions take time:

Implementation of any key decision is subjected to the approval by theboard of directors elected by share holders. This process may takemore tim

HBL at a Glance:

HBL is a Banking Company, which is engaged in Commercial & Retail

Banking and related services domestically and overseas. HBL was

incorporated on 25th August 1941 and operated in the private sector

until its nationalization in 1974. HBL has been approved for

privatization and the privatization commission has selected a Financial

Advisor to prepare a comprehensive plan and assist in the sale

process. HBL is one of the largest commercial bank of Pakistan. It

accounts for a substantial share (20%) of the total commercial banking

market in Pakistan with a network of 1,705 domestic branches; 55

overseas branches in 26 countries spread over Europe, the Middle East,

Far East, Asia, Africa and the United States; 3 HBL wholly owned

Subsidiaries namely Habib Bank Financial Services (PVT) LTD. Karachi,

Habib Finance International LTD (Hong Kong) and Habib Finance

2


10/23

IPO Related Issues

Australia Ltd. Sydney; 2 Joint Ventures namely Habib Nigeria Bank

Ltd. (40%) and Himalayan Bank Ltd. (20%) and 2 representative offices

in Iran and Egypt.

The HBL IPO:

The HBL IPO is the largest offering ever in Pakistan in terms of both

value and number of successful applicants. Road show Presentations

for the Offer for the Sale of Shares of Habib Bank Limited (HBL) were

held in Karachi on July 23, 2007 and in Lahore on July 24, 2007. The

Offer for Sale was conducted by the Privatization Commission,

Government of Pakistan out of State Bank of Pakistans shareholding inHBL.

Global Securities Pakistan Limited has been appointed as the Lead

Manager for the Transaction. 34,500,000 shares (5% of the Paid-up

Capital) of HBL are being offered at a price of Rs.235/- (inclusive of a

premium of Rs. 225/- per share) and in case of oversubscription the

Privatization Commission may exercise the Green shoe option and offer

an additional 17,250,000 shares (2.5% of Paid-up Capital).

The offer for sale of shares of Habib Bank Limited at the Karachi Stock

Exchange has been 1.7 times oversubscribed, as it attracted over

428,000 applications worth Rs 18.638 billion, much higher than the

government's target of Rs 12.14 billion, provisional figures showed on

Tuesday. Deposit growth for the year has been 12.5% and the net

asset growth of the bank has been 19% over 2007. HBLs consolidated

Pre-tax profit for 2008 is Rs. 22.03 billion and the profit after tax is Rs.

15.61 billion, which translates into an earning per share of Rs. 20.47.

HBL IPO Related issues:

2


11/23

IPO Related Issues

Preparing Detail financial results:

HBL started preparing detailed financial results on a regular basis, and

developed a business plan two years in advance of the desired IPO.

Soon thereafter, HBL put its IPO team together, consisting of the lead

investment bank, an accountant, and a law firm. At the first meeting,

which took place six to eight weeks before a company officially

registers with the Securities and Exchange Commission, all the

members of the IPO team plan a timetable for going public and assign

certain duties to each member.

The prospectus:

The most important and time-consuming task facing the HBL IPO team

is the development of the prospectus, a business document that

basically serves as a brochure for the company. The prospectus

includes all financial data for a company for the past five years,

information on the management team, and a description of a

company's target market, competitors, and growth strategy. There is a

lot of important information in the prospectus, and the underwriting

team must make sure it is accurate.

IPO Registration issues:

An IPO requires that a company have $5 million in net worth. The

process requires lengthy and expensive paperwork and a full review by

the SECP. HBL Registration documents include detailed disclosure,historical financial statements, and third party audits that took time to

assemble. The process took hours of assistance by attorneys and

accountants, and the SEC review can last from 20 to 60 days.

Registration alone cost HBL thousands of dollars even before the

offering makes any money.

2


12/23

IPO Related Issues

Cost involved in going public:

Every year hence, there are audit fees, legal fees, quarterly reports,

proxy reports, miscellaneous filings, annual reports, transfer agent

fees, public relations, investor relations, and a whole host of other

expenses relating to being a public company. HBL is bearing all these

expenses.

Market Pressure:

Market Pressures is causing HBL to focus too much on short-term

results to maintain stock prices, forgoing risks necessary for futuresuccess.

Public shareholders may demand dividends, even though management

believes reinvestment of earnings is better.

Restrictions on management:

Public companies have boards of directors who are meant to oversee

managements actions on behalf of shareholders. In somecircumstances a strong board of directors may limit the actions of

management. Going public gives management less control over day-to-

day operations. So HBLs management is going through such

restrictions.

Methods of data collection:

2


13/23

IPO Related Issues

For accessibility and availability of information I have chosen to work

on the management of HBL. Most of the information used in this report

is from primary sources. The main source of information was the

focus group discussion. In addition information was also collected from

websites and different reports on HBL from internet.

SWOT Analysis:

SWOT Analysis is a strategic planning method used to evaluate the

Strengths, Weaknesses, Opportunities, and Threats involved in a

project or in a business venture.

Strengths: Habib Bank Limited is well established bank enjoying

long history of over 65 years of experience and profitable operations. It

has the largest branch network. HBL is the market leader in introducing

e-banking. It has the largest ATM network in Pakistan.

Weaknesses: HBLs weakness is that its mission is not defined.

Though HBL is the second largest bank in Pakistan, yet the fact

remains that it is not market leader as NBP. Its total assets are alwaysless than NBP total assets. Most of the employees lack managerial

training.

Opportunities: Habib bank of Pakistan enhances its Rupee

travelers cheques (RTCs) sales by searching for new market niches. It

can introduce debit card system. HBL is planning to develop network

for electronic transactions.

Threats: The low discount rates are negatively influencing the

advances rates which may affect the banks profit on the other side.

Foreign banks are operating in Pakistan by providing new technologies

and better quality services which is a major threat to HBL.

2
http://en.wikipedia.org/wiki/Strategic_planning#Elementshttp://en.wikipedia.org/wiki/Projecthttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Strategic_planning#Elementshttp://en.wikipedia.org/wiki/Projecthttp://en.wikipedia.org/wiki/Business


14/23

IPO Related Issues

Conclusion:

There are many advantages for a company going public like the

financial benefit in the form of raising capital is the most distinct

advantage. Some disadvantages are that the costs of floatation can

be substantial; one will have to consider shareholders interests

when running the company - which may differ from his/her own

objectives. Increased disclosure of information is also a big issue.

Going public may require organizational structure change--e.g.,

from a partnership to a corporation. Before initiating a public

offering, a company should consider how the company's existence

will change if it is public.

Recommendations:

In the light of above conclusion I will give some suggestions for the

better function of Bank. Management should provide better

arrangement for the employees. Information technology should be

introduced in all branches of HBL to enhance the efficiency. Aggressive

publicity campaign must be introduced through press and electronic

media for new products and schemes by initiating vigorous marketing

policy. Online banking should be introduced in all the branches.

References:

1) http://www.investopedia.com/terms/i/ipo.asp

2) http://www.privatisation.gov.pk/finance/hbl/HBL%20IPO

%20Offering%20Documents.htm

3) http://www.dawn.com/2007/06/30/ebr2.htm

2
http://www.investopedia.com/terms/g/goingpublic.asphttp://www.investopedia.com/terms/i/ipo.asphttp://www.privatisation.gov.pk/finance/hbl/HBL%20IPO%20Offering%20Documents.htmhttp://www.privatisation.gov.pk/finance/hbl/HBL%20IPO%20Offering%20Documents.htmhttp://www.dawn.com/2007/06/30/ebr2.htmhttp://www.investopedia.com/terms/g/goingpublic.asphttp://www.investopedia.com/terms/i/ipo.asphttp://www.privatisation.gov.pk/finance/hbl/HBL%20IPO%20Offering%20Documents.htmhttp://www.privatisation.gov.pk/finance/hbl/HBL%20IPO%20Offering%20Documents.htmhttp://www.dawn.com/2007/06/30/ebr2.htm


15/23

IPO Related Issues

4) http://www.gopublictoday.com/goingpublic/goingpublic-

disadvantages.php

5) http://lastbull.com/advantages-and-disadvantages-of-ipo-public-

limited-companies/

PEPCO

CONSULTANCY SERVICES

FOR

INITIAL PUBLIC OFFERING (IPO)

The Government of Pakistan (GOP) approved in 1992 a strategic plan forrestructuring the Power Sector in Pakistan. In accordance with this plan thePower Wing of WAPDA, covering the entire geographical area of Pakistan

2
http://www.gopublictoday.com/goingpublic/goingpublic-disadvantages.phphttp://www.gopublictoday.com/goingpublic/goingpublic-disadvantages.phphttp://www.gopublictoday.com/goingpublic/goingpublic-disadvantages.phphttp://www.gopublictoday.com/goingpublic/goingpublic-disadvantages.php


16/23

IPO Related Issues

except Karachi which is provided electricity by KESC, was disintegratedinto corporatised entities (9 DISCOs, 4 GENCOs and NTDC). All thesecorporatised entities are managed by Pakistan Electric Power Company (Pvt)Ltd. (PEPCO).PEPCO intends to list Jamshoro Power Company Limited (JPCL) and

Northern Power Generation Company Limited (NPGCL) in domestic StockExchange(s) and to offer GOP shares in the two companies for sale throughInitial Public Offering (IPO) on as is where is basis . It is intended toutilize the sales proceeds of the IPOs towards partial (20% - 40%) funding ofthe estimated USD 945 million and USD 650 million respectively requiredfor installation of additional 1000 MW & 700 MW power plant units atJPCL & NPGCL to mitigate the existing power crisis.PEPCO is looking for the services of a well qualified and experienced Party /Consulting Firm to carry out an initial study to asses the feasibility of the

intended IPO process involving :-i. Preliminary review of both companies including review of auditedfinancial statements.

ii. Review of power sector, current market dynamics and work out an initialprice range using market valuation multiples based on publicly availableinformation.

iii. Review PEPCOs ability to undertake the transaction in light of thePrivatisation Commission (PC) Ordinance and other relevant rules andregulations.

iv. Detail all necessary GOP permissions and approvals to undertake theIPOs.

v. Provide detailed listing process and key information required.

Interested Parties / Consulting Firms should submit their proposals alongwith their company profile to undertake the above task to Senior GeneralManager (T&P) PEPCO, 747-WAPDA House, Lahore by 9/12/2009 beforeoffice closing hours i.e 2:45 pm. as the proposals opening has been fixed as3:00 pm.Time period for performance of contract is four (04) weeks from the date ofaward of service contract.PEPCO reserves the right to accept or reject any proposal without assigningany reason.

Thinking of taking your company public?

2


17/23

IPO Related Issues

We at inc.com can't guarantee you a favorable market for your initial public offering andriches beyond your wildest dreams, but we can help you make smart decisions along theIPO trail. This guide is a collection of tips, techniques, how-tos, and advice from theleaders of successful companies who took the IPO plunge and lived to tell about it. Also,because we realize that failure can often be the best teacher, we've assembled some

cautionary tales loaded with wisdom gleaned from public offerings that either bombed ornever happened. If you're banking on a zero-defect IPO, don't miss them.

IPO Basics

IPO Basics: Stock Exchanges and Securities Laws

Are you in over your head when it comes to securities and the publicmarkets? This article will help you understand exchanges and the rulesthat govern them.

IPO Basics: A Road Map

Take a quick tour through the IPO process.

IPO Basics: Due Diligence

One of the keys to a smooth IPO is a thorough review of yourbusiness. This due diligence process ensures you can back upeverything you say in your SEC registration statement.

What Does Sarbanes-Oxley Mean for Companies That Want to Go

Public?

Added costs may keep smaller businesses away.

Players and Paperwork

IPO Basics: The Registration Statement

Considering a public offering? This primer on registration statementswill get you started.

IPO Basics: Investment Bankers, Underwriters, and Other Key Players

Make sure you understand who the players are and their roles in theIPO process.

2
http://www.inc.com/articles/1999/11/15750.htmlhttp://www.inc.com/articles/1999/11/15744.htmlhttp://www.inc.com/articles/1999/11/15747.htmlhttp://www.inc.com/magazine/20050901/surviving-so-sidebar.htmlhttp://www.inc.com/magazine/20050901/surviving-so-sidebar.htmlhttp://www.inc.com/articles/1999/11/15745.htmlhttp://www.inc.com/articles/1999/11/15746.htmlhttp://www.inc.com/articles/1999/11/15750.htmlhttp://www.inc.com/articles/1999/11/15744.htmlhttp://www.inc.com/articles/1999/11/15747.htmlhttp://www.inc.com/magazine/20050901/surviving-so-sidebar.htmlhttp://www.inc.com/magazine/20050901/surviving-so-sidebar.htmlhttp://www.inc.com/articles/1999/11/15745.htmlhttp://www.inc.com/articles/1999/11/15746.html


18/23

IPO Related Issues

IPO Basics: Confidential Filings

Worried about all the confidential information you will have todisclose if you decide to go public? Don't be - the U.S. Securities andExchange Commission (SEC) will treat such informationconfidentially if you ask.

Quiet Period Rules Revised

Good news! Appearing in Playboy is no longer out of the question.

Big Decisions

The Allure of Going Public

Even now, public markets hold a powerful appeal for entrepreneurs.But as the CEO of any public company will tell you, the IPO is nocakewalk. In fact, it's just the start of the next phase. The question ofwho's on your team matters more than ever.

Follow the Money

A dollar-by-dollar look at the cost of one company's IPO -- or why$7.2 million raised is $6 million earned.

Making the Most of the IPO Road Show

The CEO of Peet's Coffee, Chris Mottern, shares some advice forpitching potential investors during an IPO road show.

Weighing the Benefits of Hitting the IPO Road

Successful IPOs bring capital and growth, but they also havedrawbacks.

IPOs: How Soon and How Much?

2
http://www.inc.com/articles/1999/11/15749.htmlhttp://www.inc.com/topic/U.S.+Securities+and+Exchange+Commissionhttp://www.inc.com/topic/U.S.+Securities+and+Exchange+Commissionhttp://www.inc.com/magazine/20051001/priority-going-public.htmlhttp://www.inc.com/articles/2003/07/25588.htmlhttp://www.inc.com/magazine/19970601/1255.htmlhttp://www.inc.com/articles/2002/05/24190.htmlhttp://www.inc.com/topic/Chris+Motternhttp://www.inc.com/articles/1999/11/15714.htmlhttp://www.inc.com/articles/1999/11/15748.htmlhttp://www.inc.com/articles/1999/11/15749.htmlhttp://www.inc.com/topic/U.S.+Securities+and+Exchange+Commissionhttp://www.inc.com/topic/U.S.+Securities+and+Exchange+Commissionhttp://www.inc.com/magazine/20051001/priority-going-public.htmlhttp://www.inc.com/articles/2003/07/25588.htmlhttp://www.inc.com/magazine/19970601/1255.htmlhttp://www.inc.com/articles/2002/05/24190.htmlhttp://www.inc.com/topic/Chris+Motternhttp://www.inc.com/articles/1999/11/15714.htmlhttp://www.inc.com/articles/1999/11/15748.html


19/23

IPO Related Issues

When should you take your company public? How do you set yourinitial share price? How many shares should you sell? Learn theanswers here.

Exiting Through an Initial Public Offering

Although this exit strategy is an option for only a select group ofentrepreneurial companies, its rewards are well worth the careful

planning required.

IPO Cautionary Tales

Paradise Lost

Nearly two years after PRT Groups celebrated IPO, the company'sstock price was under water and CEO Doug Mellingerwas out of ajob. Heres a look at how things went so wrong, so fast.

So Near...And Yet So Far

Going public is a big deal. So is almost going public. Three Inc. 500CEOs discuss the lessons they learned from their aborted IPOs.

Aftermath: Anatomy of a Yanked Public Offering

Learn about the IPO failure that practically killed Young Minds.

IPO Alternatives

Striking Out with VCs?

You're not alone. As venture capitalists become more risk averse,more early-stage companies are utilizing private investments in publicequity.

Just a Little Bit Public

As the stock market sputters, private placements are on the rise.

Selling Out

2
http://www.inc.com/articles/2002/01/24202.htmlhttp://www.inc.com/magazine/19991101/15403.htmlhttp://www.inc.com/topic/Doug+Mellingerhttp://www.inc.com/magazine/19991015/14309.htmlhttp://www.inc.com/topic/Three+Inc.http://www.inc.com/articles/1998/03/13068.htmlhttp://www.inc.com/magazine/20060101/handson-finance.htmlhttp://www.inc.com/magazine/20050801/finance.htmlhttp://www.inc.com/articles/1999/11/15741.htmlhttp://www.inc.com/articles/2002/01/24202.htmlhttp://www.inc.com/magazine/19991101/15403.htmlhttp://www.inc.com/topic/Doug+Mellingerhttp://www.inc.com/magazine/19991015/14309.htmlhttp://www.inc.com/topic/Three+Inc.http://www.inc.com/articles/1998/03/13068.htmlhttp://www.inc.com/magazine/20060101/handson-finance.htmlhttp://www.inc.com/magazine/20050801/finance.htmlhttp://www.inc.com/articles/1999/11/15741.html


20/23

IPO Related Issues

Going public is not the only way a company can raise capital. Onealternative is to sell the business to a more established firm.

IPO Alternatives: SEC Registration Exemptions

Need to raise capital but you're not ready to go public? Consider amore limited offering, such as selling securities only in the state inwhich your company is incorporated.

Forgoing the IPO In Favor of Selling

Mitchell Jones made the decision to sell his five-year-old company onthe heels of trying to buy somebody else's. The next logical stepwould have been an IPO, but he nixed the idea because the process

would've taken too long.

Inc. Classics

You Don't Know Me...

The story of one owner who, shunned by Wall Street, took hiscompany public by himself.

Light Up, Go Public, Quit Your Day Job

The accidental IPO: How a man and his cigar found investors who alllove a good smoke.

The 100-Day Makeover

A close-up look at the changes a company had to make before it couldgo public.

2
http://www.inc.com/articles/1999/11/15743.htmlhttp://www.inc.com/articles/2000/10/20990.htmlhttp://www.inc.com/topic/Mitchell+Joneshttp://www.inc.com/magazine/19970601/1253.htmlhttp://www.inc.com/topic/Wall+Streethttp://www.inc.com/magazine/19970601/1256.htmlhttp://www.inc.com/magazine/19960501/1656.htmlhttp://www.inc.com/articles/1999/11/15743.htmlhttp://www.inc.com/articles/2000/10/20990.htmlhttp://www.inc.com/topic/Mitchell+Joneshttp://www.inc.com/magazine/19970601/1253.htmlhttp://www.inc.com/topic/Wall+Streethttp://www.inc.com/magazine/19970601/1256.htmlhttp://www.inc.com/magazine/19960501/1656.html


21/23

IPO Related Issues

Process Of Initial Public Offering (IPO Process)

In this paper we will describe briefly the process ofInitial Public Offering or IPO Process. The IPO process willbe explained step by step and we also show therole of the underwriter behind the initial publicoffering.

Mainly the small private companies issue IPO to grow and trade publicly.The process of initial public offering consists of several steps. Those arediscussed below.

When a company is aiming to go public, at first it hires an investment

bank to do the underwriting, the way of raising money through equityor debt, functions associated with the issue. Although, a companyitself also may sell its shares but, usually an investment bank isselected for that purpose. Underwriters act as intercessors between the

public, who are investing, and the companies.

The investment bank and the company will first initiate the process ofdeal negotiation. The main discussing issues are the money amountthat the company is going to raise, security type to be issued and allthe other details involved with the underwriting agreement.

Once the deal gets finalized, the investment bank sets a registrationstatement up which will be submitted to the Securities and ExchangeCommission. That registration statement consists of informationregarding the offering and also other company informations like,

background of the management, financial statements, legal issues etc.

Then the Securities and Exchange Commission (SEC) needs a coolingoff period during which it will examine all the submitted documentsand make sure that all information regarding the deal have been given

2


22/23

IPO Related Issues

to them. After getting the SEC's approval, a date is going to be fixedon which the company will offer the stock to the public.

During the above mentioned cooling off period the underwriterpublishes an initial prospectus that contains all the necessaryinformation regarding the company. The effective date of issuing thestock as well as the price have not been mentioned in the prospectus,for these are not known at this time.

Then the company and the underwriter meets to decide the price of thestock. This decision depends highly on the current market condition.

Lastly, the stocks are sold in the market and money is raised from theinvestors.

Initial public offering (IPO)

Going public is a significant milestone for a company. A successful IPO (initial publicoffering) constitutes a dramatic change in the company and shareholder position withmany new opportunities and benefits, as well as a lot of new risks.

We, at Deloitte Brightman Almagor Zohar, have been advising and assisting companiesin the process of going public for many years. We serve more than 120 companies with

over 150 offerings, whose shares are traded in Israel, the U.S.A. and Europe.

Drawing on our experience we built an IPO team which consists of specialistsin accounting, auditing, tax, and capital markets.

2


23/23

IPO Related Issues

Our team will take you step by step through the process with added-value assistance,based on extensive experience and "know how".