An IPO, or initial public offering, refers to the first time a private firm sells shares of its stock to the public on the stock exchange. This event signifies the company’s shift from private to public ownership, which is why an initial public offering (IPO) is frequently called “going public.” It provides an opportunity for a firm to raise large funds, such as to support future growth or to pay off debt. It also enables private investors, including entrepreneurs, angel investors, and family members, to ‘cash out’ from their investment. ARC specifically has provided advice on more than fifty traditional initial public offerings (IPOs), primarily on the NYSE and Nasdaq marketplaces, since its founding in 2015.
The Growth & ‘Buzz’ around IPOs
The term “IPO” has been a buzzword in the financial world for decades. In many ways, it is the ultimate symbol of a successful business, which is why so many entrepreneurs utilize it to draw in private market investors beforehand. But how did IPOs develop?
The volume and capital raised by U.S. initial public offerings (IPOs) have increased dramatically since their inception. Smaller-scale offers were available in the early years, but there was significant development in the 1990s and 2000s, especially with the emergence of digital giants like Microsoft and Amazon. Following the 1999 dot-com bubble, which saw a peak of 457 initial public offerings (IPOs) raising $98.3 billion, the 2010s saw a steadier but nonetheless thriving IPO market with noteworthy listings like Facebook and Alibaba. With more than 1,000 IPOs and $200billion raised, the market saw further upswing in 2020 and 2021, primarily due to tech and SPACs. Even though market volatility caused a slowdown in 2022 and 2023, initial public offerings (IPOs) have proven to be a resilient and important instrument for capital generation.
Over 19,000 private corporations today are currently closed to investors, with only 13% (2,790) of U.S. companies with annual revenue of $100 million or more being publicly traded. This illustrates why initial public offerings (IPOs) can be so highly sought after.
The Process
1. Preparation:
The first phase involves advice on strategic decision-making. ARC Group will assess your company’s growth potential, the market environment, and finance requirements in close collaboration with your board and management to decide whether an IPO is the best course of action. The entire process is managed by ARC Group, which makes sure all the details are in line for success. We identify and manage critical service providers including underwriters, accountants, and legal counsel, allowing your team to concentrate on driving the business forward whilst we handle the entire IPO process. In-depth due diligence is also carried out by ARC, which examines operations, finances, and hazards before making crucial changes to optimize investor attractiveness and position your business for an IPO.
2. Filing:
The business develops and submits the S-1 registration statement to the SEC during the filing phase, outlining its operations, financials, risk factors, and how it plans to use the revenues from the IPO. The business files a final prospectus with offering specifics, such as the share price and the quantity of shares to be sold, after the SEC examines the document and may request amendments.
3. Marketing:
To engage institutional investors, the company’s executives and underwriter’s go on a roadshow while showcasing the financial results and business plan. In order to determine demand and maintain interest, investor input aids in the finalization of the price and share distribution.
4. Launch:
The company’s shares are listed on a public exchange, like the NYSE or NASDAQ, on the day of the IPO. The company becomes a public entity when the sale to institutional and retail investors is facilitated by underwriter’s ad the stock starts trading.
5. Post-IPO Compliance:
Completing continuing regulatory obligations, such as the SEC filings (10-Q,10-K), is the last stage. Insider share sales are usually restricted by a lock-up period, and shareholder communication is maintained through an investor relations program. In order to maintain long-term investor confidence and regulatory compliance, support initiatives may also be used to control early stock volatility.
Considering taking your company public through an IPO? ARC Group are global leaders in IPO advisory. Let us collaborate – contact@arc-group.com
Author:
Yap Juantao
Analyst
Read more about our advisory & strategy expertise
References
- https://www.goldmansachs.com/our-firm/history/moments/2000-dot-com-bubble
- https://www.nasdaq.com/articles/a-record-year-for-ipos-in-2021
- https://www.advisorpedia.com/chart-center/number-of-public-companies-v-private-us/
The insights provided in this article are for general informational purposes only and do not constitute financial advice. We do not warrant the reliability, suitability, or correctness of the content. Readers are advised to conduct independent research and consult with a qualified financial advisor before making any investment decisions. Investing in financial markets carries risks, including the risk of loss of principal. Past performance does not guarantee future results.
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