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Initial Public Offerings

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The IPO Process

You should be able to explain and support your reactions to the following questions:

•What is an IPO?
•What is the difference between a public corporation and a private partnership or corporation?
•How does the SEC regulate a company in going "public" and once it is a public entity?
•Give an example of a recent IPO. Why do you think this company went "public"?

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Solution Summary

The solution explains what an internal public offering is and its difference in the public and private corporation.

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a) What is an IPO?

IPO stands for Initial Public Offering. A company's IPO is the first time a company sells its stock to public investors. Before the IPO, the company cannot have sold stock to investors. The act of offering an IPO is often known as " taking a company public" or "going public". (1)

b) What is the difference between a public corporation and a private partnership or corporation?g

Public corporations have many stockholders, often thousands or even millions of stockholders. Public corporations have to abide by many government regulations, such as the timely filing of 10-Q reports, and a board of directors to make decisions.

A private corporation has only a few shareholders. The company's owners are not required to make as much financial information about the company public. Many small businesses are private corporations. For example, some doctor's offices are private corporations; there is only one doctor in the private corporation, and that doctor and his/her spouse own all the shares of stock. (1)

c) How does the SEC regulate a company in going "public" and once it is a public entity?

The Securities Act of 1933 regulates the registration of ...

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