Initial Public Offerings

When a company decides to go public, the process can take a team of people to ensure that things move smoothly. The first step in the process is for a company to choose an investment bank. The role of the investment bank is to manage the process for the company that will be offering the Initial Public Offering or IPO. This investment bank is also known as the originating house since this is where the initial sales of the shares begins. The investment bank helps the company with analyzing the market and the over-all decision making process. According to (IPO Basics: Investment Bankers, Underwriters and Other Key Players", 1999) the investment bank that is handling the IPO will assign a lead under writer.

The underwriter will handle the sales of the stock being offered. Also according to the website (IPO Basics: Investment Bankers, Underwriters And Other Key Players", 1999), the underwriter will most often purchase the shares of stock at a designated discount and then offer those shares for sale to the public for the face value of the stock. This purchase is considered a firm commitment and can show the public that the investment bank believes the stock will hold its value. The underwriter can sometimes offer to sell the stock in what is considered a best effort process. In this process the underwriter only commits to make a best effort to sell the shares.

On some occasions the underwriter of an IPO may create a group of other investment bankers in order to create a larger pool of resources for marketing the shares of stock. This group is called a syndicate. This group of investment bankers may purchase the shares themselves and then attempt to sell them or simply help to market the shares for sale to other buyers.( IPO Basics: Investment Bankers, Underwriters And Other Key Players", 1999 ).