Arif Khurshed - Initial Public Offerings: The mechanics and performance of IPOs

This book is organised into the following chapters:

• An Introduction to IPOs: This chapter covers some basic information on going public such as the life cycle of companies, and why and when companies go public. It also discusses how companies prepare for an IPO.
• A History of IPOs: This chapter begins with a discussion of the regulatory and administrative history of UK IPOs at the London Stock Exchange (LSE). A discussion of share trading on LSE follows. The third section of the chapter provides a brief history of IPOs in the UK since 1945. In the last part of the chapter I discuss some high profile UK and international IPOs.
• Mechanics of IPOs: This chapter looks at the dynamics of an IPO, such as the different methods by which a firm can do an IPO on the LSE and their implications for potential investors. Information is included on how IPOs are priced, how to apply for shares and how share allocations are made in practice. There is also a look at when shares are received by investors and when can they be traded.
• The Performance and Survival of IPOs: This chapter looks at what happens once a company successfully lists on the stock market. When investors buy shares in an IPO firm, they expect healthy profits from their investment. Are their profits really healthy? What happens if the investors decide not to sell their shares in the immediate after-market but to hold on to their investments for a longer period of time? Will the IPO firm survive long enough to provide a good return on investment? Questions like these are answered in this chapter using historic and current data on LSE IPOs.
• Investing in IPOs: This chapter looks at where to find information on firms planning an IPO, what the IPO prospectus says about the quality of the firm, and what factors identify good or bad IPO investments.

Businesses in the private sector are started either as unincorporated or incorporated concerns. Unincorporated businesses fall into two types depending on whether there is a single owner (sole trader) or several owners (partnership). With an unincorporated business there is no legal distinction between the business and its owner(s).

Incorporated businesses have a separate legal identity from their owners. Of these, the commonest form are companies limited by shares. They can be private or public limited companies. Private limited companies can only sell their shares or debentures privately but public limited companies (PLCs) can raise capital from the public at large through an IPO.

Both the unincorporated and incorporated businesses are initially funded by the founder owners and as these firms grow they need more capital. The owners may first turn to their friends and family when they need additional funds. Later they may borrow from a bank either as a fixed-term loan or through an overdraft facility. When such sources are exhausted the firms may turn towards private equity providers such as business angels and venture capitalists (VCs).