Walk me through the IPO process from mandate to first trade, naming each major milestone in order and the purpose of each.

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The IPO process moves from selecting a syndicate, to filing with the SEC, through roadshow bookbuilding, pricing, allocation, and then the first trade.

  1. Bake-off: banks pitch for the lead-left role, and the company selects its syndicate based on valuation views and distribution capability.
  2. Due diligence and S-1 drafting: lawyers, auditors, and bankers work up the S-1 registration statement, which discloses the business, risk factors, and audited financials.
  3. SEC review: the S-1 is filed (often confidentially first), and the SEC comments; the document is amended until it is cleared for marketing.
  4. Pre-marketing / testing-the-waters: research analysts educate investors to gauge initial valuation appetite and shape the coming price range.
  5. Setting the range and launching: a preliminary price range (e.g., $17–$19) is printed on the red herring, and the offering is formally launched.
  6. Roadshow and bookbuilding: management presents to institutional investors over roughly two weeks while the syndicate desk collects non-binding indications of interest, building the demand curve.
  7. Pricing: the night before trading, the company and bookrunners set the final offer price based on the book's depth and quality, balancing issuer proceeds against first-day performance.
  8. Allocation and first trade: shares are allocated (favoring long-only accounts), and the stock opens for trading, typically at a premium that reflects the planned IPO discount.

Enterprise value bridge

Equity value800
+ Total debt380
− Cash & equivalents(150)
+ Minority interest20
+ Preferred stock15
Enterprise value1,065
Illustrative figures

Also asked as

  • Distinguish primary and secondary shares in an offering: who receives the proceeds, what happens to share count, and who is diluted in each case?
  • A company sells 40M primary shares at $12.50 with a 6.5% gross spread. Compute gross proceeds, total fees, and net proceeds to the company.
  • What is the standard IPO discount, why does it exist, and why is a 50% first-day pop a pricing failure rather than a success?
  • Explain the greenshoe end to end: the 115% allocation, the syndicate's short, and what happens in both the stock-up and stock-down scenarios. Why is the short riskless for the syndicate?
  • A company with 120M pre-IPO fully diluted shares issues 30M primary shares at $22. Compute pre-money and post-money equity value, new investors' ownership, and the implied market cap the press should quote at pricing.
  • Compare a traditional IPO, a direct listing, and a SPAC merger across: capital raised, fees/dilution, price discovery, stabilization, and disclosure. When does each make sense?
  • Your IPO book is 9x oversubscribed but 70% of demand is from hedge funds with price limits at the midpoint. The issuer wants to price $3 above the top of the range. As lead-left, what do you advise and why? Quantify the trade-offs you would present.
  • A sponsor owns 100% of a company with 200M shares. At IPO: 25M secondary shares sold at $16 (7% spread), stock rises 20% by lock-up expiry, where the sponsor sells another 60M shares in a follow-on at a 4% spread and a 3% file-to-offer discount to the then-market price. Compute total sponsor net proceeds across both sales and the sponsor's remaining ownership percentage.
  • An IPO comps to $2.8B fair equity value pre-money on 100M pre-IPO shares. The company needs $465M net primary proceeds (7% spread) and prices at a 12% IPO discount. Solve for the offer price, primary shares issued, post-money equity value, and the implied first-day return if the stock closes exactly at fair value.

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