Initial Public Offerings (IPOs)
IPOs are a process by which companies can raise capital by selling shares in the company on a stock market. This step means that the public can for the first time buy a stake in the company. The process is used by smaller private companies which need capital to expand, or state companies which want to privatise or tap into the capital markets.
Companies do not necessarily choose to list in their domestic market. Indeed many choose to list in major financial centres to provide greater access to investors. The listing company will appoint bookrunners – investment banks who underwrite and manage the process of initial bids for the shares, and seek to gain the best price for them.
Companies will issue a prospectus providing information to potential investors which will be circulated by the bookrunner and approved by the stock exchange as meeting the listing requirements. This will include typically include financial information, business description and risk factors.