What is IPO?
IPO is a process of registering shares of a company’s stock with a financial or securities market regulating authority and listing the stock on an Exchange in order to offer the stock for sale to the public for the first time. Reissuance of the stock for sale shall not be regarded as IPO.
Where IPO happens
IPO takes place in the exchanges. Following exchanges are regarded as the top 10 exchanges in the world. Which are 1/New-York stock exchange, 2/Tokyo stock exchange, 3/NASDAQ, 4/Euronext, 5/London stock exchange, 6/Shanghai stock exchange, 7/Hong Kong stock exchange, 8/Toronto stock exchange, 9/Frankfurt stock exchange and 10/Madrid stock exchange. In addition to this, Australian securities exchange, Korean exchange and Shenzhen exchanges are regarded as one of the top 20 exchanges in the world.
Stocks which meet requirements established by an exchange shall be listed and are subject to further requirement to remain listed. These requirements vary depending on reputation of an exchange. Also exchanges offer various listings and standards depending on quality and nature of issuer. For example, Tokyo stock exchange issues stocks of big companies in Section 1, stocks of mid-size companies in Section 2 and High growth companies in Mothers section. While Hong Kong stock exchange offers Mainboard and GEM /growth enterprise market/. Shanghai stock exchange categorize its listing as “A shares” for shares issued in RMB and “B shares” for shares issued in USD.
In addition, exchanges offer waiver of requirements depending on the nature of project. For example, Hong Kong stock exchange generally requires companies wishing to be listed to have profit higher than 50 million HKD 3 years and capitalization of at least 200 million HKD at the time of listing. But for mining companies, as long as executives of the company have at least 3 years experience in mining and an exchange finds it sufficient, then above mentioned financial requirements will be waivered.
When you do IPO, you will need to go through preparation, waiting and post listing procedures.
Firstly, when you prepare for IPO you need to deal with underwriter, conduct due diligence, auditing financial statement, rating and preparing all necessary papers for registration at the relevant regulatory authority. While you are prohibited to disseminate any misleading information and unless authorized, to raise capital from the public.
At the second stage, you will need to submit all papers to the regulatory authority and wait for the decision to register. You may be asked by the regulatory authority to submit additional documents and clarification.
After the decision to register of the regulatory authority is issued, you have to make final amendments to the prospectus as it was approved by the regulatory authority and finalize all contractual issues regarding to IPO.
Are you ready to go public?
In order to decide whether you are ready to go public or not, the following shall be considered and clarified.
– First of all, you need to identify whether you have necessary tools to go public. Without highly qualified professional team, adequate management and structure, and internal auditing, you will not be able to go public.
– Secondly, you need to clarify with your legal advisor and potential underwriter on legal requirements of the country you would like to IPO and specific requirements of exchange you want to be listed. If you evade tax, record double financial statements, property rights and licenses of your company is in question or not legalized, it will be waste of time to consider IPO abroad.
– Finally, it’s very important to find out that whether your stocks will be actively traded in secondary market after listing. Because change is the place for intermediaries and profit seekers who are willing to play in secondary market. Hence more likely your stock will be sold in secondary market, then more attractive it will be in primary market.