An Initial Public Offering (IPO) is a vehicle for a privately held company to go public. It usually ends up as seminal event in the company’s history. The company starts off by issuing a specific number of share certificates at a specific price to investors. Once it gets listed on a specific stock market, the company’s shares can be bought and sold by individual investors.

It is an extremely complicated process with a maze of regulatory and compliance requirements. But the benefits, in terms of finance, are just as high. A successful and well-subscribed IPO can instantly turn a small regional company into an international corporate heavyweight.

The sudden influx of capital with no strings attached helps keep the company’s current business on track, and puts its growth plans on a high-speed track. Liquidity problems which can derail a company’s existence disappear, and lenders can be paid off in full. The business also gets a boost from all the hype over the IPO and customers and business partners will start looking at the company with greater trust.

The first concrete step towards an IPO is for the company to file a registration statement with the SEC. This statement, along with a prospectus for the IPO, tells the company’s entire story. It helps investors (and the SEC) decide whether the company is a good horse to bet on.

The underwriters will not only assist with the filing requirements, but also the change in the company’s structure. This means they assist in the transition from a private run enterprise to a public company with a board and stockholders. But their main job is to help decide the specifics of the IPO – the pricing, the number of shares and the market.

There are significant post-IPO reporting and disclosure requirements for public companies. Publishing quarterly financial results and holding an annual shareholder meeting are two such examples. One big area where change is almost inevitable after an IPO is the management. Every company that goes public ends up hiring new executives who have experience in managing large public companies.

The success of an IPO is mainly based on how sound the finances, growth prospects and revenue model, not to mention the viability of the sector the company belongs to. But many IPOs have crashed and burned even with all this. Reasons why an IPO might fail include bad timing, over-pricing and/or too big a size, and choosing the wrong market.

A company could pull off a large IPO in the US, but the same might not be possible in Canada, where the IPOs are usually a little bit smaller and under priced. In Europe, a company has to take into account the situation not only for its own market, but also the conditions in every market in the EU, since the economies and markets of member nations are co-dependent.

Back before the dotcom dustup, any college kid with a website could file for an Initial Public Offering and rake in the big bucks. After the latest recession, things are now every different. Investors need a company with significant assets and long-term growth prospects. The regulatory requirements too are a lot tougher, but at the end of this long hard road there is a huge pot overflowing with shareholder funds.

In order to grow and expand, many companies will go through the IPO How process and make an Initial Public Offering (IPO) to the general public. A new IPO Prospectus valuation is usually made, and Canadian IPOs are becoming more common nowadays.