“The question isn’t who is going to let me, it’s who is going to stop me?”. If that’s your mindset, we know and believe in your relentless drive to see your entrepreneurial venture become a success. We believe in your story and the impact of your purpose. And we can see the light of that day in the future, when the rest of the world wants to be a part of your journey, of your story and of your venture. The day you open the doors of your company to the public and the subscriptions pour in like a flood.
Ladies! Today we’re talking about this very vision - the day of your company’s IPO.
An IPO stands for initial public offering and it refers to the deflowering of a private company. During an IPO, a private company extends an invitation for the first time to the public to invest their funds in it, in exchange for a share in the company.
- When you decide to go for an IPO, the first decision to make is appointing an underwriter (usually an investment bank / group of banks). The underwriter act as middlemen between the company and the public. The underwriter’s role can either be to buy the entire offer from you and then resell it to the public, thus guaranteeing you a certain amount of funds. Alternatively, an underwriter can agree to sell securities for the company without any guarantee of the amount raised.
- The next step is filing certain documents viz. financial statements, management background, details of the amount of money to be raised and purpose of it etc. with the Securities and Exchange Board of India (SEBI). Once the SEBI approves the documents, a date of the IPO is set.
- In the time period where the SEBI verifies the documents filed, the company prepares a Red Herring prospectus which is a document containing all the information about the company except for the offer price and the effective date. The red herring creates a hype and is used to get the attention of the big investors.
- As the date of the offering approaches, the underwriter and the company decide on the price of the issue, depending on the promotional activities and perceived demand.
- Finally, the securities are sold on the stock market and the money is collected from investors.
A company usually opts for an IPO when it wants to expand its operations. The funds raised from an IPO are enormous and are used to fund research and development, pay off debts or make investments in assets. Further, an IPO creates a buzz and awareness around a company. This serves as a competitive advantage. Psychologically, an IPO is a validation for various stakeholders of the company viz. Employees, existing shareholders and suppliers that the future is bright.
We would like to give each of you budding entrepreneurs a huge shoutout! It’s not easy doing what you do!
Before signing off, we dedicate this song by Imagine Dragons to your spirit, passion and hardwork.
“Whatever it takes, 'Cause I love the adrenaline in my veins. I do whatever it takes, 'Cause I love how it feels when I break the chains”