Wednesday, April 4, 2012

IPO Process: Benefits and Techniques

An INITIAL PUBLIC OFFERING (IPO) allows companies to diversify their assets with funds raised from the public and to facilitate the trading of securities that shareholders decided to retain. In the case when the government or governmental institutions are selling securities in the stock market, it is mainly to restore public finances and facilitate more effective management practices within the organization.
For a firm, the IPO process can help raise more funds and capital, promote acquisitions or expansions in operations and to increase its visibility to the public. It usually sends good signals to the consumers about the company and encourages people to think that the company is in a strong position. Furthermore, the IPO process helps companies sell securities to many different investors such as: institutions, individuals, employees.

            Looking at the technical process of IPOs
, the introduction to the stock market may include a primary market (which is the sale of shares newly issued by the company), and / or secondary market (which the sale of existing shares). Placement techniques depend on whether the securities are placed with institutional investors, individuals or employees. The global placement (or guaranteed investment) is the technique most commonly used to distribute securities to institutional investors.

            One or more banks organize the marketing, promotion, and sale of securities to investors using a technique called the book building,
and banks not wanting to take this opportunity of substantial commissions. Following this procedure, the offer price is set to open simultaneously at the same open-price offer (OPO) which can benefit individuals. The global placement offers banks that are loaded by companies IPOs discretionary allocation of shares and fixing the IPO price (based on analysis of financial information relating to the undertaking concerned). Placement to individuals (or made available to the market) meet the regulatory requirement to invest at least 10% of the shares to individuals. Receipt of orders are then centralized by the Exchange (Euronext France), and not by a bank.

           The techniques available to the market are numerous and include: direct quotations which are usually for a transfer to another stock exchange or on the SME market Alternext of Euronext, minimum price offer (OPM, used very little ), price offer (OPF), Open-Price Offer (OPO, the most frequently used). In fact, direct quotation is identical to a normal trading and the first course is set up so as to enable the exchange of the greatest possible number of shares (minimum sale price fixed, non-centralized purchase orders by the company scholarship).  Furthermore, the minimum price offer (OPM) is a sort of auction process.
Buyers interested in the shares of the company listed soon denominate their trading orders, valid only on the day of introduction, "at any price" or a limit price or minimum price 10% above. And finally, the price offer (OPF) and Open Price Offer (OPO, which implies a price range) sets the issue price of the securities, which is announced in advance. 

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