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If you are planning to set up IPO for your start-up this means that you are now all bucked up for calling out investment from the public. A business will require more and more capital to operate its business at its full potential.
It might not be possible for companies to run there business entirely from what they earn as revenue. Hence they opt for ways like IPO.
Initial Public Offering (IPO) means offering shares of a company for the first time for the public to subscribe.
The buyers of shares of the company are given the position of owners of the company while the money raised through subscription is deployed by the company in the pre-decided direction.
It takes months or even years for companies to complete their IPO, though typically it is a period of six to nine months.
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There are many reasons why a company will resort for IPO but majorly it is to raise capital. This also fetches visibility in market for the company. It also means opening the decision-making process up to more creative minds.
Here are the 7 steps you need to follow if you are planning on launching the IPO for your start-up.
Step:1 Appoint Underwriters
The first step requires you to opt for an investment bank These are financial experts who carry out the process of IPO for your start-up. They act as intermediaries between the company and the investors.
They act as underwriters who are the specialists helping the company to figure out the initial offer price.
They buy the shares from the hiring company that is planning on its IPO and then sell these bought shares to investors.
They make sure IPO for your start-up is completed successfully.
Step:2 Registration procedure
Herein the company along with its appointed investment bank prepare a registration statement and a draft prospectus.
It is the most time consuming step of all as there’s a pile of paperwork the company and underwriters fill out.
The registration statement prepared here contains the financial data and business plans. It will also have to declare how the Company is going to utilise the funds it will raise from the IPO and about the securities of public investment.
The registration statement has to adhere to the guideline of SEC.
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Step: 3 Filing the Red Herring document
A red herring document is the initial prospectus of the company which contains the probable price estimated per share and other details regarding the IPO for your start-up.
This is not the final prospectus and hence the disclaimer is also published at the first page of the prospectus.
Step:4 The roadshow of IPO
This step involves a travelling sales pitch. It happens over a period of two weeks. These roadshows are used to convince investors about the potential of the company
Herein the heads/executives of the company travel around the country marketing and presenting their IPOs to potential investors.
The idea is to ascertain the the possible demand among investors and promote and educate about their company through presentation of facts and figures.
Step:5 Ascertaining IPO price
Under this process, the decision regarding the price of shares is taken.
The company can either go with a Fixed Price IPO or Book Building Issue. As the name suggests, in fixed-price IPO the prices are fixed by the company in the order document.
The book-building issue will have a price band within which an investor can bid. The company also decides on which stock exchange it wants to list its company. The Company asks the SEC to announce the registration statement as effectual so that purchases can be made.
Step:6 Making IPO public
On the date planned by the company, the prospectus and application forms are made available to the public, online and offline.
The forms can be accessed by people from any designated banks or brokerage firms. Once the details are filled, forms can be submitted with a cheque or online as well.
READ MORE: How to prepare a pitch for a start-up?
SEBI has fixed the period of availability of an IPO to the public, which is usually 5 working days.
Step:7 Settling the subscriptions
This is the last step wherein the underwriters and investment bank put there heads together to decide how many shares will every investor will receive.
Depending on whether the shares are oversubscribed or fully subscribed, the share allotment is done. The shares are credited accordingly to Demat account.
Once the securities are allotted, the stock market will start trading the Company’s IPO.
Deciding on your start-up’s IPO is definitely a big decision. You must consider the question first ‘whether you are IPO ready?’ for it is a big responsibility.
If your operations have been wholesome for quite a time, there are chances that your IPO can be successful But if the business had a rough year, it’s probably not the time to toss it into the deep-end to see if it can swim.
Therefore consider all pros and cons and your readiness for IPO before actually initiating one.