Question

1.What is an IPO and what is the IPO process for a new company.

2- Explain in your own words why Ms. Nandy said that “preferred stocks are in between equity

and debt securities”

3- What is a financial security based on what we have talked about in class

4- What are bonds usually used for?

5- What is the difference between primary and secondary markets from an investor point of

view?

Answer 1

Sol 1.> An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors.

Steps to an IPO include the following:

1. Underwriters present proposals and valuations discussing their services, the best type of security to issue, offering price, amount of shares, and estimated time frame for the market offering.
2. The company chooses its underwriters and formally agrees to underwriting terms through an underwriting agreement.
3. IPO teams are formed comprising underwriters, lawyers, certified public accountants, and Securities and Exchange Commission experts.
4. Information regarding the company is compiled for required IPO documentation.
5. Marketing materials are created for pre-marketing of the new stock issuance.
6. Form a board of directors.
7. Ensure processes for reporting auditable financial and accounting information every quarter.
8. The company issues its shares on an IPO date.
9. Some post-IPO provisions may be instituted.

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