What is an initial public offering IPO Describe the role inv

What is an initial public offering (IPO)? Describe the role investment banks play in an IPO.

Solution

Initial Public Offering (IPO) is the first sale of stock by a private company to the public. Initial Public Offerings are usually issued by small scale, new enterprises require the capital to expand, however large private organizations looking to become publicly traded can also issue IPO.

The role of investment bank in an IPO is to search investors who are ready to purchase the securities that the enterprize intends to place on the open market.

It also helps the company in preparing the prospectus, writing of the prospectus and working with other concerned parties to ensure that the prospectus complies with the law.