Hello all, Suppose that a firm needs to make IPO and it needs to be provided...

Hello all,

Suppose that a firm needs to make IPO and it needs to be provided with the service of securities origination only, how this service will be finalized from the investment bank's side? I mean if we view this as process, what would be the output to the firm? And is it possible for a firm to get assisted only with such a service, assuming it can handle the real sale of its securities.

Thanks in advance!

Expert Solution

Once the firm plans to go for IPO, the process involves lots of activities mostly related to securities origination function and asset allocation.
Usually a FINRA registered and licensed Investment Bank, financial institution or Broker-Dealer performs this function for the firm. The services from the financial institution usually involve support function with respect to the trading of the securities through a facilitating or Broker-Dealer trading platform. The firm decides the total securities to be traded, initial offer price of the stock or security to be brought to IPO, and sets the conditions for allocation in terms of maximum allocation limit to a particular category of the Investor. The Broker-Dealer lists calls for the funds from the investors on an average price basis or bidding basis. On the day when the allocation is supposed to happen, each investor is allocated a specific proportion of securities based on the highest bid made. The Securities Broker communicates the allocation to the investors in advance before the securities could be listed or brought to stock exchange. Subsequent services of the securities trading and margin maintenance are provided by the Broker-Dealer, and serves as a custodian of the securities being traded.
Output to the firm will be the securities being brought to the public at the securities exchange, a continuous broker-Dealer and trading support to the investors of the firm, custody of the securities and administration of the records and transactions made by Investors in their respective trading accounts maintained with the Broker-Dealer.
As discussed, the firm also gets assisted in trading and custody support for the securities held by the Investors. Administration of the securities transactions occurring through frequent trading through Investor trading accounts, investment advisory and margin support are few other major services the Broker-Dealer provides to the firm and its Investors.

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