Initial public offering (IPO)
An initial public offering (IPO) refers to the first time a company sells shares publicly. It is a form of equity financing.
An IPO is usually momentous for a company, often coming after years of borrowing money and attracting private investors. It is a step a company might want to take when it is healthy, growing and wants to increase that growth but can’t raise enough money privately to do so.
IPOs also offer a good opportunity for early private investors to exit by selling all or part of their shares.
More about initial public offerings (IPOs)
An IPO is an expensive and complicated process. Companies hire investment banks to help compile the required documents for the Canadian Securities Administrators (which regulates IPOs in Canada). These investment banks also promote the IPO to their clients.
An investment bank will help the company decide whether to issue common, preferred or voting shares; at what price; how the process will unfold and to whom they will be sold (for example, angel investors, venture capitalists). It will also help define the company’s dividend policy and help manage tax, legal and compliance risks as well as governance and other issues.
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