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===Advantages===
When a company listsbecomes itspublicly securities on a [[Stock exchange|public exchange]]listed, the money paid by the investing public for the newly issued shares goes directly to the company (primary offering) as well as to any early private investors who opt to sell all or a portion of their holdings (secondary offerings) as part of the larger IPO. An IPO, therefore, allows a company to tap into a wide pool of potential investors to provide itself with capital for future growth, repayment of the debt, or working capital. A company selling common shares is never required to repay the capital to its public investors. Those investors must endure the unpredictable nature of the open market to price and trade their shares. After the IPO, when shares are traded in the market, money passes between public investors. For early private investors who choose to sell shares as part of the IPO process, the IPO represents an opportunity to [[monetize]] their investment. After the IPO, once shares are traded in the open market, investors holding large blocks of shares can either sell those shares piecemeal in the open market or sell a large block of shares directly to the public, at a [[fixed price]], through a [[secondary market offering]]. This type of offering is not dilutive since no new shares are being created. Stock prices can change dramatically during a company's first days in the public market.<ref>{{cite news |last1=Jessica |first1=Matthews |title=How regular investors can access IPOs |url=https://fortune.com/2021/07/08/how-to-access-ipos-regular-investors/ |access-date=30 July 2021 |work=Forbes |date=8 July 2021}}</ref>
 
Once a company is listed, it is able to issue additional common shares in a number of different ways, one of which is the [[follow-on offering]]. This method provides capital for various corporate purposes through the issuance of equity (see [[stock dilution]]) without incurring any debt. This ability to quickly raise potentially large amounts of capital from the marketplace is a key reason many companies seek to go public.
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The issuer usually allows the underwriters an option to increase the size of the offering by up to 15% under a specific circumstance known as the [[greenshoe]] or overallotment option. This option is always exercised when the offering is considered a "hot" issue, by virtue of being oversubscribed.
 
In the US, clients are given a preliminary prospectus, known as a [[red herring prospectus]], during the initial quiet period. The red herring prospectus is so named because of a bold red warning statement printed on its front cover. The warning states that the offering information is incomplete, and may be changed. The actual wording can vary, although most roughly follow the format exhibited on the Facebook IPO red herring.<ref>{{Cite web|url=https://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/d287954ds1.htm|title=Registration Statement on Form S-1|website=wwwU.secS.gov Securities and Exchange Commission |date=February 1, 2012 |access-date=10 December 2017}}</ref> During the quiet period, the shares cannot be offered for sale. Brokers can, however, take [[indication of interest|indications of interest]] from their clients. At the time of the stock launch, after the Registration Statement has become effective, indications of interest can be converted to buy orders, at the discretion of the buyer. Sales can only be made through a final prospectus cleared by the Securities and Exchange Commission.
 
The final step in preparing and filing the final IPO prospectus is for the issuer to retain one of the major financial "printers", who print (and today, also electronically file with the [[U.S. Securities and Exchange Commission|SEC]]) the registration statement on Form S-1. Typically, preparation of the final prospectus is actually performed at the printer, wherein one of their multiple conference rooms the issuer, issuer's counsel (attorneys), underwriter's counsel (attorneys), the lead underwriter(s), and the issuer's accountants/auditors make final edits and proofreading, concluding with the filing of the final prospectus by the financial printer with the Securities and Exchange Commission.<ref name="InvestorPlace">{{cite web |title=The Main Players In An Initial Public Offering |date=26 February 2012 |url = http://investorplace.com/ipo-playbook/the-main-players-in-an-initial-public-offering-ipo/#.U88EE_ldVaQ |website=InvestorPlace |first1= Tom |last1=Taulli |access-date=22 July 2014 |url-status=dead |archive-url=https://web.archive.org/web/20140724174832/http://investorplace.com/ipo-playbook/the-main-players-in-an-initial-public-offering-ipo/#.U9FHBZ3P1qZ |archive-date= 2014-07-24}}</ref>
 
Before legal actions initiated by New York Attorney General [[Eliot Spitzer]], which later became known as the [[Global Settlement]] enforcement agreement, some large [[Financial institution|investment firms]] had initiated favorable research coverage of companies in an effort to aid [[corporate finance]] departments and retail divisions engaged in the marketing of new issues. The central issue in that enforcement agreement had been [[Declaratory ruling|judged]] in court previously. It involved the conflict of interest between the [[investment banking]] and [[Financial analyst|analysis]] departments of ten of the largest investment firms in the United States. The investment firms involved in the settlement had all engaged in actions and practices that had allowed the inappropriate influence of their research analysts by their investment bankers seeking lucrative fees.<ref name=" one">{{cite web |title=Ten of Nation's Top Investment Firms SeattleSettle Enforcement Actions Involving ConflictConflicts of Interest Between Research and Investment Banking |website=SEC |date=28 April 2003 |url=https://www.sec.gov/news/press/2003-54.htm |access-date=23 July 2014}}</ref> A typical violation addressed by the settlement was the case of [[Credit Suisse First Boston|CSFB]] and [[Salomon Smith Barney]], which were alleged to have engaged in the inappropriate spinning of "hot" IPOs and issued fraudulent research reports in violation of various sections within the [[Securities Exchange Act of 1934]].
 
===Pricing===
 
A company planning an IPO typically appoints a lead manager, known as a [[bookrunner]], to help it arrive at an appropriate price at which the shares should be issuedoffered. There are two primary ways in which the price of an IPO can be determined. Either the company, with the help of its lead managers, fixes a price ("fixed price method"), or the price can be determined through analysis of confidential investor demand data compiled by the bookrunner ("[[book building]]").
 
Historically, many IPOs have been underpriced. The effect of underpricing an IPO is to generate additional interest in the stock and a rapid rise in share price when it first becomes publicly traded (known as an "IPO pop"). [[Flipping]], or quickly selling shares for a [[Profit (accounting)|profit]], can lead to significant gains for investors who were allocated shares of the IPO at the offering price. However, underpricing an IPO results in lost potential capital for the issuer. One extreme example is [[theglobe.com]] IPO which helped fuel the IPO "mania" of the late 1990s internet era. Underwritten by [[Bear Stearns]] on 13 November 1998, the IPO was priced at $9 per share. The share price quickly increased 1,000% on the opening day of trading, to a high of $97. Selling pressure from institutional flipping eventually drove the stock back down, and it closed the day at $63. Although the company did raise about $30&nbsp; million from the offering, it is estimated that with the level of demand for the offering and the volume of trading that took place they might have left upwards of $200&nbsp;million on the table.
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==Largest IPOs==
 
{| class="wikitable sortable"
! rowspan=2|Company!! rowspan=2|Year of<br>IPO !! colspan=2|Amount (USD billions)
|-
! Company || Year of IPO || Amount ||Nominal!! Inflation <br>adjusted
|-
| [[Saudi Aramco]] || 2019 || $29.4B4<ref name=":0">{{Cite web|url=https://arab.news/pj8d2|title=Aramco's 'greenshoe option' pushes IPO to $29.4 billion|date=12 January 2020|website=Arab News|language=en|access-date=15 January 2020}}</ref>|| ${{Inflation|US|29.4|2019|fmt=c|r=2}} billion
|-
| [[Alibaba Group]] || 2014 || $25B25<ref>{{cite news |url=https://www.wsj.com/articles/alibaba-ipo-biggest-in-history-as-bankers-exercise-green-shoe-option-1411334271 |work=The New York Times |title=Alibaba IPO Biggest in History as Bankers Exercise 'Green Shoe' Option |date=18 September 2013 }}</ref> || ${{Inflation|US|25|2014|fmt=c|r=2}} billion
|-
| [[SoftBank Group]] || 2018 || $23.5B5<ref>{{cite news |url=http://fortune.com/2018/12/11/softbank-ipo-record/ |work=Fortune.com |title=Softbank Corp IPO Second Biggest in History|date=11 December 2018 }}</ref> || ${{Inflation|US|23.5|2018|fmt=c|r=2}} billion
|-
| [[Agricultural Bank of China]] || 2010 || $22.1B1<ref>{{cite news |url=https://www.bloomberg.com/news/2010-08-15/agricultural-bank-of-china-sets-ipo-record-with-22-1-billion-boosted-sale.html |work=Bloomberg |title=Agricultural Bank of China Sets IPO Record as Size Raised to $22.1 Billion |date=15 August 2010 }}</ref> || ${{Inflation|US|22.1|2010|fmt=c|r=2}} billion
|-
| [[Industrial and Commercial Bank of China]] || 2006 || $21.9B9<ref>{{cite news |url=https://www.bloomberg.com/news/2010-07-28/icbc-to-seek-as-much-as-6-6-billion-in-rights-offer-to-replenish-capital.html |work=Bloomberg |title=ICBC completed its record $21.9 billion IPO in October 2006 |date=28 July 2010 }}</ref> || ${{Inflation|US|21.9|2006|fmt=c|r=2}} billion
|-
| [[AIA Group|American International Assurance]] || 2010 || $20.5B5<ref>{{cite news |url=https://www.bloomberg.com/news/2010-10-29/aia-s-ipo-boosted-to-20-5-billion-with-overallotment-update1-.html |work=Bloomberg |title=AIA's IPO Boosted to $20.5 Billion With Overallotment |date=29 October 2010 }}</ref> || ${{Inflation|US|20.5|2010|fmt=c|r=2}} billion
|-
| [[Visa Inc.]] || 2008 || $19.7B7<ref name=wsjip>{{cite news |url=https://blogs.wsj.com/deals/2010/11/17/how-gms-ipo-stacks-up-against-the-biggest-ipos-on-record/ |newspaper=[[The Wall Street Journal]] |title=How GM's IPO Stacks Up Against the Biggest IPOs on Record |date=17 November 2010 |first=Stephen |last=Grocer }}</ref> || ${{Inflation|US|19.7|2008|fmt=c|r=2}} billion
|-
| [[General Motors]] || 2010 || $18.15B15<ref>{{citation |url=https://www.bloomberg.com/news/2010-11-26/gm-says-total-offering-size-23-1-billion-including-overallotment-options.html |work=Bloomberg |title=GM Says Total Offering Size $23.1 Billion Including Overallotment Options |date=26 November 2010 }}</ref> || ${{Inflation|US|18.15|2010|fmt=c|r=2}} billion
|-
| [[NTT Docomo]] || 1998 || $18.05B05<ref name=wsjip/> || ${{Inflation|US|18.05|1998|fmt=c|r=2}} billion
|-
| [[Enel]] || 1999 || $16.59B59<ref name=wsjip/> || ${{Inflation|US|16.59|1999|fmt=c|r=2}} billion
|-
| [[Meta Platforms|Facebook]]|| 2012 || $16.01B01<ref>{{citation|url=https://dealbook.nytimes.com/2012/05/17/facebook-raises-16-billion-in-i-p-o/ |newspaper= [[The New York Times]] |title=Facebook Raises $16 Billion in I.P.O.|date=17 May 2012|first1=Evelyn M.|last1=Rusli|first2=Peter|last2=Eavis}}</ref> || ${{Inflation|US|16.01|2012|fmt=c|r=2}} billion
|}
 
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{| class="wikitable sortable"
|-
! Year || Stock exchange || Proceeds <br>(in bn USD)
|-
| 2009 || rowspan="3"| [[Hong Kong Stock Exchange]]<ref>{{cite news |url=http://www.ft.com/intl/cms/s/0/d9733718-2c4a-11e1-b7df-00144feabdc0.html |archive-url=https://ghostarchive.org/archive/20221210/http://www.ft.com/intl/cms/s/0/d9733718-2c4a-11e1-b7df-00144feabdc0.html |archive-date=10 December 2022 |url-access=subscription |title=China eclipses US as top IPO venue |newspaper=Financial Times |date=28 December 2011}}</ref> ||
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| 2015<ref name="FT">{{Cite news|url=https://www.ft.com/content/ae9e6500-e69b-11e7-8b99-0191e45377ec |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/ae9e6500-e69b-11e7-8b99-0191e45377ec |archive-date=10 December 2022 |url-access=subscription|title=Global number of IPOs highest since financial crisis|newspaper=Financial Times|date=27 December 2017|last1=Bullock|first1=Nicole}}</ref> || rowspan="2"| [[Hong Kong Stock Exchange]] ||
|-
| 2016<ref name="FT" /> ||style="text-align:right"| 25.2
|-
| 2017<ref name="FT" /> || [[New York Stock Exchange]] ||style="text-align:right"| 29.4
|-
| 2018<ref>{{Cite web|url=https://www.scmp.com/business/companies/article/2179283/hong-kong-easily-regains-2018-global-ipo-crown-new-york-thanks|title=Hong Kong regains global IPO crown from New York in 2018 thanks to its listing reforms|date=24 December 2018}}</ref> || rowspan="2"| [[Hong Kong Stock Exchange]] ||style="text-align:right"| 31.2
|-
| 2019<ref>{{Cite web|title=Hong Kong Ranks Top in Global IPO Markets for 2019|url=https://www.caixinglobal.com/2019-12-18/hong-kong-ranks-top-in-global-ipo-markets-for-2019-101495294.html|access-date=2021-11-26|website=[[Caixin]]|language=en}}</ref> ||style="text-align:right"| 40.4
|-
| 2020<ref>{{Cite web|url=http://www.xinhuanet.com/english/2021-01/13/c_139664764.htm#:~:text=The%20report%20said%20Nasdaq%20topped,listed%20in%20HKEX%20to%202%2C538.|title=Hong Kong ranks as 2nd largest IPO market in 2020|date=13 January 2021}}</ref> || rowspan="2"| [[Nasdaq]] ||style="text-align:right"| 57.8
|-
| 2021<ref>{{Cite web|url=https://home.kpmg/content/dam/kpmg/cn/pdf/en/2021/12/china-hk-ipo-2021-review-and-outlook-for-2022.pdf|title=Mainland China and Hong Kong IPO markets - 2021 review and 2022 outlook |accessdate= 26 December 2021}}</ref> ||style="text-align:right"| 100.6
|-
| 2022<ref>{{Cite web|url=https://assets.kpmg.com/content/dam/kpmg/cn/pdf/en/2023/03/china-hk-ipo-2023-q1-review.pdf |title= Chinese Mainland and Hong Kong IPO markets 2023 Q1 review |accessdate= 24 June 2023}}</ref> || rowspan="2"| [[Shanghai Stock Exchange]] ||style="text-align:right"| 56.5
|-
| 2023<ref>{{Cite web|url= https://assets.kpmg.com/content/dam/kpmg/cn/pdf/en/2024/01/china-hk-ipo-markets-2023-review-and-2024-outlook.pdf |title= Chinese Mainland and Hong Kong IPO markets 2023 and 2024 outlook |accessdate= 29 January 2024}}</ref> ||style="text-align:right"| 31.3
|-
| 2024 mid-yearQ3<ref>{{Cite web|url=https://assets.kpmg.com/content/dam/kpmg/cn/pdf/en/2024/0610/china-hk-ipo-2024-mid-yearq3-review.pdf |title= Chinese Mainland and Hong Kong IPO marketsMarkets: 2024 mid-yearQ3 review |accessdate= 2913 JuneOctober 2024}}</ref> || rowspan="21"| [[New York Stock ExchangeNasdaq]] ||style="text-align:right"| 1014.84
|}
 
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==References==
{{Reflist|30em}}
<ref name="ref50">{{cite web |title=IPO GMP Live - IPO Grey Market Premium |url=https://finnance.in/ipo-gmp-live-ipo-grey-market-premium/ |website=Finnance.in |access-date=2024-07-26}}</ref>
 
==Further reading==
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