An initial public offering (IPO) is a process that allows private companies to raise money by selling their shares to the public.
Although initial public offerings can be great money-making opportunities, they are risky investments. It can deliver inconsistent returns over time.
How They Work
Getting into the public market is a time-consuming process that most private companies can’t handle alone. Aside from preparing for the increased scrutiny that comes with an IPO, a private company also has to meet the various requirements of the country’s securities regulator.
An investment bank, usually an underwriter, helps private companies set the initial price for their IPO. The bank also helps the management prepare the documents related to the offering. It then forms a syndicate with other financial firms to distribute the shares to the public. This group of banks will be responsible for handling the distribution of the shares.
After the company and its financial advisors have set the initial price, the underwriter issues the shares to investors. The stock of the company then begins trading on the stock exchange.
Should I do it?
Through an initial public offering, a company can raise additional capital. The funds can be used for research and development, paying off debt, or expanding operations.
Other than banks and venture capital firms, private investors can also be used to raise capital. However, these types of investments can be costly.
Getting into the public market can also boost a company’s public profile. It can allow it to stand out from the crowd and attract more potential investors.
However, going public can be very costly for a company. In addition to filing financial reports, a company must disclose other details about its operations. These include the activities of its senior executives.
Should I Buy?
Before you can buy a company’s stock, it’s essential that you thoroughly understand the various steps involved in the process.
According to Gregory Sichenzia, a securities attorney, an individual usually has to buy the stock through their stockbroker. Some stock brokers, such as 5Paisa, Upstox, and Zerodha, may allow access to the initial public offerings of a company. However, they may set forth specific requirements for their customers.
Is It For Me?
The initial public offerings of companies carry various risks. Unlike buying the shares of publicly-traded companies, an IPO is private, and there is a lack of data on private companies.
Many people make a bundle from investing in initial public offerings. Unfortunately, there are many more that fail. From 1975 to 2011, over 60% of initial public offerings experienced negative absolute returns.
A company’s initial public offering is not a good long-term strategy. For instance, if a company’s IPO price is too high, it may not be possible for the investor to get back the capital invested.
This blog was originally published on GreggJaclin.net, January 2, 2023
Gregg E. Jaclin
Gregg E. Jaclin is a consultant who works with entrepreneurs, professionals, and companies. Based in Princeton, New Jersey, for two decades, he enjoys close involvement with many entrepreneurial organizations. His primary focus is on companies that are planning on going public.
Gregg has encountered many entrepreneurs who needed help figuring out how to establish their companies. They often have questions about the type of company they should create and the various challenges they’ll face.
Having experienced the many challenges and opportunities of starting and growing a company, Gregg believes that his knowledge and network of professionals have benefited other entrepreneurs.
Gregg E. Jaclin’s extensive experience raising capital, which includes working with investment banks and issuers, gives him the necessary knowledge to help entrepreneurs and business professionals get their companies off the ground. His ability to connect with clients has made him a highly sought-after consultant.
Gregg received his Bachelor’s degree from the University of Maryland at College Park in 1992 and followed that with his J.D. from Cardozo School of Law in 1995. After receiving his J.D., Gregg became a partner at Anslow & Jaclin, LLP in 1996 and was with the firm through 2013. He focused his practice on securities involving reverse mergers with domestic United States companies, foreign domiciled, or operations-based companies.
In 2013, Gregg E. Jaclin joined the securities practice of the law firm Blumstein, Lakind, and Blader. From November 2012 to October 2013, he served as the CEO and the CFO of Eastern Acquisition Corp, a public company.
Gregg has represented various companies in connection with their capital-raising transactions. He has also worked with NASD registered dealers and brokers in the process of helping them navigate the various regulations and requirements of the capital markets. Through his connections within the investment community, he has introduced numerous clients to potential sources of capital.
His ability to provide clients with the necessary guidance and advice has made Gregg E. Jaclin an ideal consultant. His years of experience and success have allowed him to help them make informed decisions regarding their financial and business matters. Over the years, he has dedicated his time and energy to developing his skills and network.
Gregg values honesty and communication above all. Gregg’s ability to connect with his clients and share various concerns helps him and his clients succeed in their entrepreneurial endeavors.
Gregg is also very knowledgeable about the various aspects of public offerings, or IPOs. As a result, he can provide his clients with the necessary advice and guidance when making decisions regarding their finances and business.
Gregg E. Jaclin takes the time to guide his clients through the various business development steps. He is dedicated to helping them understand their goals and how they can achieve them.
Very proud of his work as a consultant, Gregg is determined to provide his clients with the best possible service. Helping his clients achieve their goals and make informed decisions is very satisfying for Gregg. He also works hard to be both reliable and resourceful.
Gregg E. Jaclin is devoted to his family. He is the father of two children, Rachel and Ben. Even though his schedule keeps him busy, he enjoys spending time with his family and coaching his children’s sports teams.Even when not coaching his children, he supports them by cheering them on and encouraging them to achieve greater success and embrace their passions.
About the Creator
Gregg Jaclin is based in Princeton, NJ and has dedicated his career to business consulting. He is particularly involved in working with entrepreneurs and focuses on companies looking to launch IPOs and other public equity matters.