Читать книгу Corporate Finance For Dummies - Michael Taillard - Страница 68

When a company is getting ready to go public, meaning it’s opening up the purchase of equity to the public, it must first put all its records and reports in the proper format. The U.S. Securities and Exchange Commission (SEC) requires that all U.S. public companies follow specific criteria for keeping track of financial information and reporting it to the public. The company must also meet a number of accountability requirements and other more minor requirements. In other words, before becoming a corporation, a business must act like a corporation. Often this includes hiring a consultant or an investment banker to help make sure everything is in order. Then, finally, the company can go through the process of becoming established as a corporation and selling stock.

The easiest way to become a corporation is to go through a full-service investment bank. Often the investment bank can take a company through all the steps, including legally reorganizing the company as a corporation, registering with the proper regulatory authorities, underwriting, and selling stock on the primary market. The legal reorganization process alone is well beyond the scope of this book; I recommend just asking a lawyer.

During the underwriting stage, an underwriter evaluates the value of the company and estimates how much the company needs to raise, how much it should raise, and how much it’s likely to raise. That same person verifies that the company meets all the requirements for being a corporation and selling stock. After that, the company can have its first IPO.

An IPO, or initial public offering, occurs when a company sells stock to the public. The IPO is when selling stock raises money for the company. After all, the company will use the money that people pay to own stock to purchase things the company needs to operate or expand. The people who buy stock from the company during the IPO make up the primary market because they take part in the initial sale of stock. After the initial stock is sold to the public, it can be resold over and over again, but the company itself doesn’t make any more money. The subsequent selling of stock is just an exchange of ownership between investors for a price negotiated between those same investors. The exchange of stock between investors is called the secondary market; it doesn’t raise any more money for the company.

Any company, old or new, can have an IPO. All it means is that new stock has been created and registered and is being sold for the first time. If an old corporation decides it wants to raise more money and it thinks investors are willing to pay for more stock, then it can have another IPO to sell new stock that will just add to the total amount of stock the company has on the market.