Page 89 - Initial Public Offering - An Introduction to IPO on Wall Street

investor relations. If a business can have a strong story to tell, these consultants may help
customize it for investors.

Negotiating and Signing the Price Amendment and the Underwriting Agreement

By the time of the submission of the statement of registration, the securities to be sold, both the
number of shares and the dollar sum, are usually decided by a business and its underwriter.
However, the final figure at which the securities should be sold to the public, the precise sum
of the concession to the underwriter, and the net proceeds to the registrant have not yet been
calculated.

The arrangement and final decision of these sums depend on a variety of factors, including the
business's past and current results, existing securities market circumstances, and expressions
of interest obtained during the roadshow.
The underwriters would look at a combination of sales, income, or cash flow based on that of
comparable organizations when setting an offering price. These combinations will be linked to
the most recent outcomes of operations of the business and their future expected results. To
determine existing market sentiment in the related field, the underwriter will also analyze the
existing stock market price of similar firms.

The IPO discount is another factor. Ten to twenty percent is a standard IPO discount. In other
terms, a modest increase in the price per share in the aftermarket could make provision for
initial offering price right after the IPO. The stock should stabilize at an aftermarket share value
similar to comparable firms after the duration of trading.
In deciding the final offer value of shares, the timing plays as vital a part as any other aspect.
Nearly any business that went public during the dot-com bubble would have achieved it at a
higher offering price than during the 2008 economic crisis.

Relevant sectors go through hot and cold cycles, in addition to seasonal market conditions.
Stocks sold on the stock market are always influenced, either negatively or positively, by the

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