Page 152 - Initial Public Offering - An Introduction to IPO on Wall Street

You must choose an investment bank that is a good match for your organization in terms of
awareness of your market and alignment with your goals and business maturity level. To ensure
this, you need to consider the following factors when choosing an investment bank for an IPO.

Interest Level

You must ascertain the degree of the genuine interest of an investment bank in your business.
You need to be sure that the investment bank you choose will provide your IPO with the level
of attention it merits and will continue to show a long-term interest in your business.

Experience

The investment bank you choose should have expertise in building IPOs and should ideally
have performed underwriting for IPOs of the scale envisaged. Using its experience, the
investment banker should be able to help you inappropriately structuring the offering to achieve
your strategic and financial goals.

Sales Capability

Your investment bank's capacity to sell the stock of your business will impact the early success
of the IPO, subsequent market performance, and long-term outcomes. To attract potential
investors it cannot personally reach, the investment bank should be able to organize suitable
syndicates.

Ability to Make the Market

Like other representatives of the selling syndicate, your investment bank should be able to act
as a market maker for the stock of your business.

Industry Knowledge

If they have a good understanding of the market your business is competing in, the investment
banker would be better equipped to operate on your behalf.

Research and Analysis

It is advantageous having an investment bank with a strong research team that uses an expert
to monitor your business as your IPO partner. The analyst's frequent research reports about
your business would improve the awareness of investors and future business suitors about your
company. This can only be a good thing.

8.3 Investors
Investors have always been interested in IPOs as they offer a very good opportunity to invest
in quality businesses looking to generate money. IPOs of strong stable businesses provide both
the business and the investors with a win-win situation.

You may have learned that when an IPO is launched, IPOs have different categories in which
investors can pump their money into. The IPO subscription is also available to various groups
of investors in different slots. Of the overall shares the business wishes to list, all categories of
investors have a defined quota or proportion of shares allocated.

For businesses, the preferred buyers of stock are larger entities or institutional investors, as
opposed to individual investors. Therefore, for these preferred stockholders, slots are open on
specific dates and at specific times. The allocation of shares depends on the category of

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