Initial Public Offering (IPO): What It Is and How It Works
- Search Search Please fill out this field.
- What Is an IPO?
- How an IPO Works
History of IPOs
- The IPO Process
- Pros and Cons
Investing in an ipo.
- Performance of an IPO
Investopedia / Zoe Hansen
What Is an Initial Public Offering (IPO)?
An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance for the first time. An IPO allows a company to raise equity capital from public investors.
The transition from a private to a public company can be an important time for private investors to fully realize gains from their investment as it typically includes a share premium for current private investors. Meanwhile, it also allows public investors to participate in the offering.
- An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance.
- Companies must meet requirements by exchanges and the Securities and Exchange Commission (SEC) to hold an IPO.
- IPOs provide companies with an opportunity to obtain capital by offering shares through the primary market.
- Companies hire investment banks to market, gauge demand, set the IPO price and date, and more.
- An IPO can be seen as an exit strategy for the company’s founders and early investors, realizing the full profit from their private investment.
How an Initial Public Offering (IPO) Works
Before an IPO, a company is considered private. As a pre-IPO private company, the business has grown with a relatively small number of shareholders including early investors like the founders, family, and friends along with professional investors such as venture capitalists or angel investors .
An IPO is a big step for a company as it provides the company with access to raising a lot of money. This gives the company a greater ability to grow and expand. The increased transparency and share listing credibility can also be a factor in helping it obtain better terms when seeking borrowed funds as well.
When a company reaches a stage in its growth process where it believes it is mature enough for the rigors of SEC regulations along with the benefits and responsibilities to public shareholders , it will begin to advertise its interest in going public.
Typically, this stage of growth will occur when a company has reached a private valuation of approximately $1 billion, also known as unicorn status . However, private companies at various valuations with strong fundamentals and proven profitability potential can also qualify for an IPO, depending on the market competition and their ability to meet listing requirements.
IPO shares of a company are priced through underwriting due diligence . When a company goes public, the previously owned private share ownership converts to public ownership, and the existing private shareholders’ shares become worth the public trading price. Share underwriting can also include special provisions for private to public share ownership.
Generally, the transition from private to public is a key time for private investors to cash in and earn the returns they were expecting. Private shareholders may hold onto their shares in the public market or sell a portion or all of them for gains.
Meanwhile, the public market opens up a huge opportunity for millions of investors to buy shares in the company and contribute capital to a company’s shareholders' equity . The public consists of any individual or institutional investor who is interested in investing in the company.
Overall, the number of shares the company sells and the price for which shares sell are the generating factors for the company’s new shareholders' equity value. Shareholders' equity still represents shares owned by investors when it is both private and public, but with an IPO, the shareholders' equity increases significantly with cash from the primary issuance.
The term initial public offering (IPO) has been a buzzword on Wall Street and among investors for decades. The Dutch are credited with conducting the first modern IPO by offering shares of the Dutch East India Company to the general public.
Since then, IPOs have been used as a way for companies to raise capital from public investors through the issuance of public share ownership.
Through the years, IPOs have been known for uptrends and downtrends in issuance. Individual sectors also experience uptrends and downtrends in issuance due to innovation and various other economic factors. Tech IPOs multiplied at the height of the dotcom boom as startups without revenues rushed to list themselves on the stock market.
The 2008 financial crisis resulted in a year with the least number of IPOs. After the recession following the 2008 financial crisis , IPOs ground to a halt, and for some years after, new listings were rare. More recently, much of the IPO buzz has moved to a focus on so-called unicorns—startup companies that have reached private valuations of more than $1 billion. Investors and the media heavily speculate on these companies and their decision to go public via an IPO or stay private.
What Is the IPO Process?
The IPO process essentially consists of two parts. The first is the pre-marketing phase of the offering, while the second is the initial public offering itself. When a company is interested in an IPO, it will advertise to underwriters by soliciting private bids or it can also make a public statement to generate interest.
The underwriters lead the IPO process and are chosen by the company. A company may choose one or several underwriters to manage different parts of the IPO process collaboratively. The underwriters are involved in every aspect of the IPO due diligence , document preparation, filing, marketing, and issuance.
Steps to an IPO
- Proposals. 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.
- Underwriter. The company chooses its underwriters and formally agrees to underwrite terms through an underwriting agreement.
- Team. IPO teams are formed comprising underwriters, lawyers, certified public accountants (CPAs), and Securities and Exchange Commission (SEC) experts.
- Documentation. Information regarding the company is compiled for required IPO documentation. The S-1 Registration Statement is the primary IPO filing document. It has two parts—the prospectus and the privately held filing information. The S-1 includes preliminary information about the expected date of the filing. It will be revised often throughout the pre-IPO process. The included prospectus is also revised continuously.
- Marketing & Updates. Marketing materials are created for pre-marketing of the new stock issuance. Underwriters and executives market the share issuance to estimate demand and establish a final offering price. Underwriters can make revisions to their financial analysis throughout the marketing process. This can include changing the IPO price or issuance date as they see fit. Companies take the necessary steps to meet specific public share offering requirements. Companies must adhere to both exchange listing requirements and SEC requirements for public companies.
- Board & Processes. Form a board of directors and ensure processes for reporting auditable financial and accounting information every quarter.
- Shares Issued. The company issues its shares on an IPO date. Capital from the primary issuance to shareholders is received as cash and recorded as stockholders' equity on the balance sheet. Subsequently, the balance sheet share value becomes dependent on the company’s stockholders' equity per share valuation comprehensively.
- Post IPO. Some post-IPO provisions may be instituted. Underwriters may have a specified time frame to buy an additional amount of shares after the initial public offering (IPO) date. Meanwhile, certain investors may be subject to quiet periods .
Advantages and Disadvantages of an IPO
The primary objective of an IPO is to raise capital for a business. It can also come with other advantages as well as disadvantages.
One of the key advantages is that the company gets access to investment from the entire investing public to raise capital. This facilitates easier acquisition deals (share conversions) and increases the company’s exposure, prestige, and public image, which can help the company’s sales and profits.
Increased transparency that comes with required quarterly reporting can usually help a company receive more favorable credit borrowing terms than a private company.
Companies may confront several disadvantages to going public and potentially choose alternative strategies. Some of the major disadvantages include the fact that IPOs are expensive, and the costs of maintaining a public company are ongoing and usually unrelated to the other costs of doing business.
Fluctuations in a company's share price can be a distraction for management, which may be compensated and evaluated based on stock performance rather than real financial results. Additionally, the company becomes required to disclose financial, accounting, tax, and other business information. During these disclosures, it may have to publicly reveal secrets and business methods that could help competitors.
Rigid leadership and governance by the board of directors can make it more difficult to retain good managers willing to take risks. Remaining private is always an option . Instead of going public, companies may also solicit bids for a buyout. Additionally, there can be some alternatives that companies may explore.
Can raise additional funds in the future through secondary offerings
Attracts and retains better management and skilled employees through liquid stock equity participation (e.g., ESOPs)
IPOs can give a company a lower cost of capital for both equity and debt
Significant legal, accounting, and marketing costs arise, many of which are ongoing
Increased time, effort, and attention required of management for reporting
There is a loss of control and stronger agency problems
A direct listing is when an IPO is conducted without any underwriters . Direct listings skip the underwriting process, which means the issuer has more risk if the offering does not do well, but issuers also may benefit from a higher share price. A direct offering is usually only feasible for a company with a well-known brand and an attractive business.
In a Dutch auction , an IPO price is not set. Potential buyers can bid for the shares they want and the price they are willing to pay. The bidders who were willing to pay the highest price are then allocated the shares available.
When a company decides to raise money via an IPO it is only after careful consideration and analysis that this particular exit strategy will maximize the returns of early investors and raise the most capital for the business. Therefore, when the IPO decision is reached, the prospects for future growth are likely to be high, and many public investors will line up to get their hands on some shares for the first time. IPOs are usually discounted to ensure sales, which makes them even more attractive, especially when they generate a lot of buyers from the primary issuance.
Initially, the price of the IPO is usually set by the underwriters through their pre-marketing process. At its core, the IPO price is based on the valuation of the company using fundamental techniques. The most common technique used is discounted cash flow , which is the net present value of the company’s expected future cash flows.
Underwriters and interested investors look at this value on a per-share basis. Other methods that may be used for setting the price include equity value, enterprise value , comparable firm adjustments, and more. The underwriters do factor in demand but they also typically discount the price to ensure success on the IPO day.
It can be quite hard to analyze the fundamentals and technicals of an IPO issuance. Investors will watch news headlines but the main source for information should be the prospectus , which is available as soon as the company files its S-1 Registration. The prospectus provides a lot of useful information. Investors should pay special attention to the management team and their commentary as well as the quality of the underwriters and the specifics of the deal. Successful IPOs will typically be supported by big investment banks that can promote a new issue well.
Overall, the road to an IPO is a very long one. As such, public investors building interest can follow developing headlines and other information along the way to help supplement their assessment of the best and potential offering price.
The pre-marketing process typically includes demand from large private accredited investors and institutional investors, which heavily influence the IPO’s trading on its opening day. Investors in the public don’t become involved until the final offering day. All investors can participate but individual investors specifically must have trading access in place. The most common way for an individual investor to get shares is to have an account with a brokerage platform that itself has received an allocation and wishes to share it with its clients.
Performance of IPOs
Several factors may affect the return from an IPO which is often closely watched by investors . Some IPOs may be overly hyped by investment banks which can lead to initial losses. However, the majority of IPOs are known for gaining in short-term trading as they become introduced to the public. There are a few key considerations for IPO performance.
If you look at the charts following many IPOs, you'll notice that after a few months the stock takes a steep downturn. This is often because of the expiration of the lock-up period . When a company goes public, the underwriters make company insiders, such as officials and employees, sign a lock-up agreement.
Lock-up agreements are legally binding contracts between the underwriters and insiders of the company, prohibiting them from selling any shares of stock for a specified period. The period can range anywhere from three to 24 months. Ninety days is the minimum period stated under Rule 144 (SEC law) but the lock-up specified by the underwriters can last much longer. The problem is, when lockups expire, all the insiders are permitted to sell their stock. The result is a rush of people trying to sell their stock to realize their profit. This excess supply can put severe downward pressure on the stock price.
Some investment banks include waiting periods in their offering terms. This sets aside some shares for purchase after a specific period. The price may increase if this allocation is bought by the underwriters and decrease if not.
Flipping is the practice of reselling an IPO stock in the first few days to earn a quick profit. It is common when the stock is discounted and soars on its first day of trading.
Tracking IPO Stocks
Closely related to a traditional IPO is when an existing company spins off a part of the business as its standalone entity, creating tracking stocks . The rationale behind spin-offs and the creation of tracking stocks is that in some cases individual divisions of a company can be worth more separately than as a whole. For example, if a division has high growth potential but large current losses within an otherwise slowly growing company, it may be worthwhile to carve it out and keep the parent company as a large shareholder then let it raise additional capital from an IPO.
From an investor’s perspective, these can be interesting IPO opportunities. In general, a spin-off of an existing company provides investors with a lot of information about the parent company and its stake in the divesting company. More information available for potential investors is usually better than less and so savvy investors may find good opportunities from this type of scenario. Spin-offs can usually experience less initial volatility because investors have more awareness.
IPOs are known for having volatile opening day returns that can attract investors looking to benefit from the discounts involved. Over the long term, an IPO's price will settle into a steady value, which can be followed by traditional stock price metrics like moving averages . Investors who like the IPO opportunity but may not want to take the individual stock risk may look into managed funds focused on IPO universes. But also look out for so-called hot IPOs that could be more hype than anything else.
What Is the Purpose of an Initial Public Offering?
An IPO is essentially a fundraising method used by large companies, in which the company sells its shares to the public for the first time. Following an IPO, the company’s shares are traded on a stock exchange. Some of the main motivations for undertaking an IPO include: raising capital from the sale of the shares, providing liquidity to company founders and early investors, and taking advantage of a higher valuation.
Can Anybody Invest in an IPO?
Oftentimes, there will be more demand than supply for a new IPO. For this reason, there is no guarantee that all investors interested in an IPO will be able to purchase shares. Those interested in participating in an IPO may be able to do so through their brokerage firm, although access to an IPO can sometimes be limited to a firm’s larger clients. Another option is to invest through a mutual fund or another investment vehicle that focuses on IPOs.
Is an IPO a Good Investment?
IPOs tend to garner a lot of media attention, some of which is deliberately cultivated by the company going public. Generally speaking, IPOs are popular among investors because they tend to produce volatile price movements on the day of the IPO and shortly thereafter. This can occasionally produce large gains, although it can also produce large losses. Ultimately, investors should judge each IPO according to the prospectus of the company going public as well as their financial circumstances and risk tolerance.
How Is an IPO Priced?
When a company goes IPO, it needs to list an initial value for its new shares . This is done by the underwriting banks that will market the deal. In large part, the value of the company is established by the company's fundamentals and growth prospects. Because IPOs may be from relatively newer companies, they may not yet have a proven track record of profitability. Instead, comparables may be used. However, supply and demand for the IPO shares will also play a role on the days leading up to the IPO.
U.S. Securities and Exchange Commission. " Form S-1 ," Pages 4–6.
U.S. Securities and Exchange Commission. " Form S-1 ," Page 1.
U.S. Securities and Exchange Commission. " What Is a Registration Statement? "
U.S. Securities and Exchange Commission. " Revisions to Rules 144 and 145: A Small Entity Compliance Guide ."
- Initial Public Offering (IPO): What It Is and How It Works 1 of 27
- IPOs for Beginners 2 of 27
- Top 10 Largest Global IPOs of All Time 3 of 27
- Offering: Definition, Types, and Examples in Finance 4 of 27
- Public Offering: Definition, Types, SEC Rules 5 of 27
- Primary Offering: What it is, How it Works 6 of 27
- What Is a Secondary Offering? How They Work, Types, and Effects 7 of 27
- Underwriter in Finance: What Do They Do, What Are Different Types? 8 of 27
- Pre-IPO Placement: Definition, How It Works, Example 9 of 27
- Public Offering Price (POP): Meaning, Process, Researching Prices 10 of 27
- Direct Public Offering (DPO): Definition, How It Works, Examples 11 of 27
- What's an IPO Lockup? Definition, Purpose, Expiration Strategies 12 of 27
- The Two Types of IPOs 13 of 27
- IPO vs. Private Placement: What's the Difference? 14 of 27
- Why Is There an IPO Lock-Up Period and How Long Does It Last? 15 of 27
- What Are the Three Stages of the IPO Life Cycle? 16 of 27
- How to Track Upcoming Initial Public Offerings (IPOs) 17 of 27
- How an Initial Public Offering (IPO) Is Priced 18 of 27
- How to Analyze an IPO and Whether to Buy 19 of 27
- The Ups and Downs of Initial Public Offerings 20 of 27
- The Road to Creating an IPO 21 of 27
- Book Building 22 of 27
- What a Roadshow Is and How It Creates a Successful IPO 23 of 27
- Quiet Period: Definition, Purpose, Violation Examples 24 of 27
- New Issue: Definition, How It Works in Offerings, and Example 25 of 27
- Underpricing: Definition, How It Works, and Why It's Used 26 of 27
- Greenshoe Option 27 of 27
- Terms of Service
- Editorial Policy
- Your Privacy Choices
By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.
Understanding and Planning an Initial Public Offering (IPO)
Are you prepared to go public.
If your company is considering whether to go public, some self-analysis is necessary to determine if your company has all the components for success. Because timing is everything during the IPO process and you may only have one chance, you should be able to effectively answer the following questions to be ready.
1. Do you have a clear business strategy for your company today and for future growth?
When you go public, you are selling your company and, most particularly for emerging companies, its vision of what it can be. A company needs to present to potential investors a thoughtful and compelling “story” of this vision and how, when and why it can be achieved.
2. Do you have the right management team in place?
Investors look closely at top management and their industry experience and track record at prior companies to see if they are capable of executing the company’s vision.
3. Do you have trusted Board members overseeing the company?
Your Board of Directors should understand your business and be able to bring ideas, as well as contacts, to the company. They should have a diverse and balanced background with expertise from operations and finance to technology and regulatory matters, to help guide the company through the early years as a public company.
4. Do you have a history of profitable operations?
Your financial results should reflect strong sales, reasonable levels of costs and momentum towards greater earnings. Your accountants may need to restate earnings from previous years if, as a private company, earnings were minimal for tax purposes.
5. Have you selected the best underwriter for your IPO?
This is perhaps the most important decision management will make. Through contacts of advisors and outside investors, companies typically seek the “biggest name” – the strongest and most reputable in successfully completed IPO transactions in your industry. But, analyst coverage, level of interest in your company, track record with other IPOs and aftermarket support are also important factors. Interview several lead underwriter candidates as part of the process.
6. Are you prepared to take on the initial and ongoing costs in being a public company?
Along with the IPO’s transactional fees and costs for underwriters, SEC registration, FINRA filing, legal counsel and accountants, there are also stock exchange listing and transfer agent fees. After the IPO, there are ongoing public reporting costs and associated professional fees, in addition to internal accounting staff and more sophisticated SOX-compliant accounting and information systems.
7. Do you know the SEC’s “hot buttons” to avoid unnecessary delays in the process?
Experienced counsel and auditors can be instrumental in this, identifying legal issues such as “gun jumping” and “integration” of prior offerings, and accounting issues such as revenue recognition that could require a restatement or significant adjustment of your financial statements.
The IPO process offers more than new growth capital, it enhances access to capital markets in the future, facilitates employee compensation, acts as “acquisition currency,” permits owners and investors to gain liquidity and improves the stature and perceived stability of your company. If you would like to discuss this possibility, Olshan can assist you in determining whether this is the right time for you. If prepared, Olshan can guide your company through every step in the process.
Understanding the IPO Process
An initial public offering (IPO) is the process achieved when a private company registers its shares of common stock with the SEC and sells them to public investors in an underwritten offering. The shares subsequently trade on a stock exchange, such as the NYSE or Nasdaq, and the company becomes subject to the public reporting requirements of the federal securities laws.
The process is often challenging – it is a time-consuming distraction for management, it often involves significant transaction costs and, with a narrow “market window,” there is no guarantee the IPO will generate the level of hoped-for proceeds, or be completed at all. Understanding the IPO process and managing it effectively can help avoid these risks.
Early preparation and an experienced team of underwriters, lawyers and accountants are key to a smoothly run IPO process. Below is an outline of the basic steps that will occur over the 3 to 5 month period:
Phase One: Pre-Offering Planning
- Begin preparation of audited historical financial statements.
- Recruit (as needed) qualified, “credentialed” management and Board members, including independent directors.
- Update organizational and capital structure to be acceptable for a public company.
Phase Two: Due Diligence and Filings
- Create electronic data room with complete legal, financial and technical due diligence documents and information for working group.
- Draft the IPO prospectus, describing the company’s products/services, business strategy, marketing and sales; its industry and target market; the management team’s experience and directors’ backgrounds; the risks regarding the company and an investment in the shares; the use of offering proceeds; the compensation paid to management and the Board; and the ownership of the company by management and other existing large shareholders.
- File the registration statement with the SEC (and consider initial confidential submission for emerging growth companies).
- Submit listing application with stock exchange for trading following the IPO.
Phase Three: Market and Close the Offering
- Through selling efforts such as a road show, the company and underwriters promote the offering to potential investors following the printing of the “red herring.”
- Before the IPO process is complete, implement all necessary controls and procedures, organize Board committees, secure appropriate level of D&O insurance and adopt employee equity incentive award plan.
- When demand for the offering solidifies, management and underwriters price the shares to the public and sign the underwriting agreement. The stock begins trading the day after pricing, and the company receives the offering net proceeds three business days thereafter.
The entire IPO process is much more involved than many people realize – advance planning with the right team of advisors increases the chances of successfully completing your IPO.
How Olshan Can Help
Olshan can provide assistance during each phase of the IPO process.
The IPO Planning Phase
The pre-IPO preparation phase sets the groundwork for a successful IPO. Olshan will:
- Identify gating issues upfront and implement changes to enhance corporate governance and transparency as a public company.
- Develop a high-level timeline clearly identifying responsibilities.
- Help assemble the right IPO team – underwriters, accountants and even CFOs.
- Provide support for dual-track strategies such as private equity and other M&A transactions.
The IPO Preparation and Filing Phase
This phase involves a substantial amount of detailed legal documentation. Deep experience with the Securities Act of 1933 and Regulation S-X is imperative during this phase as mistakes can cause serious and costly delays. Olshan will:
- Provide due diligence support for document requests from underwriters and counsel.
- Prepare registration statement on Form S-1, including business disclosures, offering terms and management bios.
- Review SOX requirements with management.
The Post-IPO Phase
The post-IPO phase requires attentive ongoing SEC reporting and disclosure. Olshan will help with the following ongoing requirements:
- Preparation of annual, quarterly and current SEC reports, and proxy statements.
- Review director and officer beneficial ownership filings.
- Development of insider trading and Regulation FD policies and codes of ethics.
Recent Olshan Public Offerings
- P10, Inc. (NYSE: PX) in Morgan Stanley-led Class A common stock initial public offering
- Alzamend Neuro, Inc. (Nasdaq: ALZN) in Spartan Capital common stock initial public offering
- Anebulo Pharmaceuticals, Inc. (Nasdaq: ANEB) in Benchmark Company common stock initial public offering
- Alleghany Corp. (NYSE: Y) in public offering of senior notes via BMO Capital Markets and Goldman Sachs
- Blink Charging Co. (Nasdaq: BLNK) in public offering of common stock via Barclays
- A.G.P. in InspireMD, Inc. (NYSE Amex: NSPR) common stock and warrant offering
- Legacy Housing Corp. (Nasdaq: LEGH) in B. Riley FBR led initial public offering of common stock
- IMAC Holdings (Nasdaq: IMAC) in Dawson James common stock and warrant initial public offering
- Source Capital in Overstock.com (Nasdaq: OSTK) blockchain voting series A preferred stock offering (first public offering of digital securities)
- Nathan's Famous (Nasdaq: NATH) in Jefferies senior note offering
- Maxim Group in Quest Resource Holding (Nasdaq: QRHC) common stock and warrant offering
- IZEA (Nasdaq: IZEA) in initial common stock offering via Aegis Capital
- Roth Capital in Pioneer Power Solutions (Nasdaq: PPSI) common stock offering
- Aerojet Rocketdyne Holdings f/k/a GenCorp (NYSE: AJRD) in Morgan Stanley, Citigroup debt offering
2021 IPO Market setting record-breaking pace
Through the third quarter of 2021, 313 IPOs have raised $107.5 billion, marking 2021 already as one of the most active years since the dot.com era. While technology and healthcare companies have accounted for most of the traditional IPO activity, the year has been accented by IPOs for trading app Robinhood Markets, electric vehicle marker startup Rivian Automotive, Covid-19 pandemic-influenced consumer brands, crypto asset mining companies and trading platforms, vertically-integrated cannabis companies and small-cap biotechs, as well as big name direct listings and endless blank-check SPAC offerings and mergers. Strong stock market trading in 2021 has supported a robust IPO market for new issuers in multiple industry sectors.
growing pipeline setting the stage for a booming 2022
All signs point to a booming IPO market in 2022. with record stock market index levels coupled with a large and growing pipeline of IPO companies positioned to thrive in a post-Covid economy, many investment banks and institutional investors expect an increase in both IPO deal count and total offering proceeds next year. As of November 11, 2021, there were 56 active IPOs in the pipeline, composed of a diverse group of companies representing the healthcare, tech and consumer segments, increasingly with ESG goals and meme stock potential. Several Olshan clients are in among those looking to test the market, as the IPO window appears to be open for new deals well into 2022.
For more information, contact one of our Corporate/Securities Partners below.
- Spencer G. Feldman t. 212.451.2234 Email
- Robert H. Friedman t. 212.451.2220 Email
- Elizabeth R. Gonzalez-Sussman t. 212.451.2206 Email
- Mitchell Raab t. 212.451.2237 Email
- Kenneth A. Schlesinger t. 212.451.2252 Email
- Kenneth M. Silverman t. 212.451.2327 Email
- Steve Wolosky t. 212.451.2333 Email
- Corporate/Securities Law
- Emerging Company Practice
- Securities Law & Capital Markets
Marketing Contact Mizi Mehaj Marketing & Administrative Manager firstname.lastname@example.org 212.451.2319
Necessary cookies enable core functionality such as security, network management, and accessibility. You may disable these by changing your browser settings, but this may affect how the website functions.
Analytical cookies help us improve our website by collecting and reporting information on its usage. We access and process information from these cookies at an aggregate level.
Explaining Initial Public Offering Basics to startups
1. what is an initial public offering ipo, 2. what are the benefits of an ipo, 3. how do you go about planning and executing an ipo, 4. what should you do if you decide to go through an ipo, 5. what are the risks associated with an ipo, 6. how do you calculate your expected return on investment roi during an ipo, 7. what are some important considerations when making a decision to go through an ipo, 8. how can startups use information provided in this blog to help them make informed, 9. can startups avoid common mistakes during and after their ipo.
An initial public offering (IPO) is the first time that a company sells shares of stock to the public. A company can raise money by selling shares of stock to investors. The money that a company raises through an IPO can be used to finance operations, expand businesses, or pay off debt.
A company that wants to go public must first file paperwork with the securities and Exchange commission (SEC). The SEC is a government agency that regulates the stock market. The paperwork that a company files with the SEC is called a registration statement.
After a company files a registration statement, the SEC will review the paperwork to make sure that the company is following all of the rules. The SEC will also make sure that the information in the registration statement is accurate.
Once the SEC has approved a company's registration statement, the company can start selling shares of stock to the public. The shares of stock will be listed on a stock exchange, such as the New york Stock exchange (NYSE) or the Nasdaq.
Investors who buy shares of stock in an IPO become owners of the company. They will have a say in how the company is run and they will be able to make money if the company's stock price goes up.
When a company goes public, it is usually because the company's owners want to raise money. The owners may need money to finance operations, expand businesses, or pay off debt. Or, the owners may want to sell shares of stock so that they can cash out and take their profits.
If you are thinking about investing in an IPO, you should do your research before you buy any shares of stock. You should read the registration statement that the company filed with the SEC. You should also talk to a financial advisor to get more information about the risks and rewards of investing in an IPO.
An IPO, or initial public offering, is the process by which a privately held company raises capital by selling shares to the public. IPOs are a key source of funding for companies, and they offer several benefits to startups.
One of the biggest benefits of an IPO is that it provides a company with a large influx of cash. This cash can be used to finance expansion, research and development, and other important investments. An IPO also allows a company to tap into new sources of capital, which can be used to fuel growth.
Another benefit of an IPO is that it can help a company to achieve a higher valuation. This is because going public typically leads to increased scrutiny from investors, which can drive up the value of a company. An IPO can also help a company to build its brand and raise awareness of its products or services.
Finally, an IPO can provide employees with an opportunity to cash in on their equity. This can be a major motivation for employees, and it can help to attract and retain top talent .
Overall, an IPO can be a great way for a startup to raise capital and fuel growth. However, it is important to note that there are also some risks associated with going public. For example, a company may be subject to greater scrutiny from investors and regulators, and it may also face increased competition.
An IPO, or initial public offering, is the process by which a company raises money by selling shares of stock to the public. IPOs are a key source of funding for companies, but they can also be a risky proposition. If a company is not prepared for an IPO, it can lead to financial problems down the road.
The first step in planning an IPO is to hire an investment banker . Investment bankers are the middlemen between the company and the investors. They will help the company determine how much stock to sell and at what price. They will also help promote the IPO to potential investors.
The next step is to file an S-1 with the Securities and Exchange Commission (SEC). The S-1 is a document that provides information about the company and the offering. It is important to make sure that all of the information in the S-1 is accurate and complete. The SEC will review the S-1 and may ask for additional information.
Once the SEC has approved the S-1, the company can start marketing the offering to potential investors. This is typically done through roadshows, where company executives travel to meet with institutional investors. The goal of the roadshow is to get investors excited about the offering and convince them to buy shares.
The final step is to price the offering and allocate the shares. The investment bankers will work with the company to determine a price that will maximize the amount of money raised. Once the price is set, the shares are allocated to different investors.
After the IPO, the company will be listed on a stock exchange and shares will start trading. The share price will fluctuate based on supply and demand. If the demand for the stock is high, the price will go up. If there is more supply than demand, the price will go down.
IPOs can be a great way to raise capital , but they are also risky. Companies should make sure that they are prepared for an IPO before taking the plunge.
Raising capital is challenging. We can help!
FasterCapital's team works on matching you with the right funding sources and presents your startup to them through warm introductions
If you're considering an IPO, there are a few things you should do to prepare. First, you'll need to make sure your financials are in order and that you have a solid business plan . You'll also need to create a prospectus, which is a document that outlines your company's financials and business plan. The prospectus is what potential investors will use to decide whether or not to invest in your company.
Once you have your financials and prospectus in order, you'll need to find an investment bank to underwrite your IPO. The investment bank will help you set the price of your IPO and market your company to potential investors.
Once you've found an investment bank and set the price of your IPO, you'll need to file an S-1 with the SEC. This is a document that outlines your company's financials, business plan, and risk factors. The SEC will review your S-1 and make sure that everything is in order before your IPO can proceed.
After your S-1 is filed, you'll need to start marketing your IPO to potential investors. This is typically done through roadshows, where representatives from your company travel to meet with potential investors. During the roadshow, you'll pitch your company and try to get investors interested in buying your stock.
Once you've completed the roadshow, it's time for your IPO to price. This is the process where investment banks set the final price of your IPO based on demand from investors. After your IPO prices, your shares will begin trading on the stock market .
If you're considering an IPO, there are a few things you should do to prepare. First, make sure your financials are in order and that you have a solid business plan. You'll also need to create a prospectus and file an S-1 with the SEC. Once you've done all of that, you'll need to start marketing your IPO to potential investors through roadshows. After your IPO prices, your shares will begin trading on the stock market.
An initial public offering, or IPO, is the first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately held companies looking to become publicly traded.
The risks associated with an IPO are numerous and can be divided into two categories: financial and legal.
Financial risks include the potential for loss of investments, dilution of shareholder equity, and increased volatility. Legal risks can include SEC investigations and lawsuits.
The most common financial risks associated with an IPO are:
Loss of investments: When a company goes public, there is always the potential that the stock price will drop below the offering price, meaning that investors will lose money. This is especially true for young companies that are not yet profitable.
Dilution of shareholder equity: When a company sells new shares in an IPO, existing shareholders see their ownership stake in the company diluted. This can lead to a loss of voting power and influence over company decisions.
Increased volatility: publicly traded companies are subject to much greater fluctuations in their stock price than privately held companies. This increased volatility can lead to losses for investors who are not prepared for it.
The most common legal risks associated with an IPO are:
SEC investigations: The Securities and Exchange Commission (SEC) investigates all IPOs to ensure that they comply with federal securities laws. If the SEC finds that a company has violated these laws, it can impose fines or other penalties.
Lawsuits: Investors who lose money in an IPO may sue the company, its officers, and its underwriters for fraud or other misrepresentations. These lawsuits can be costly to defend and can damage a company's reputation.
The return on investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments. ROI measures the amount of return on an investment relative to the investment's cost. It is expressed as a percentage and is typically used for personal financial decisions, to compare a company's profitability or to compare the efficiency of different investments.
To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio.
ROI = (gain from investment - cost of investment) / cost of investment
For example, if you invest $1,000 in a stock and it goes up by $100 in value, your ROI would be:
If the stock went down by $100 in value, your ROI would be:
Generally speaking, the higher the ROI, the better. However, it is important to keep in mind that ROI is not the only factor to consider when making investment decisions . Other factors such as risk and the time horizon of the investment should also be taken into account.
IPOs can be a great opportunity to make money, but they are also high risk. Before investing in an IPO, it is important to do your homework and calculate your expected ROI.
Here are some things to consider when calculating your expected ROI from an IPO:
1. The share price at IPO. This is the most important factor in determining your ROI. The higher the share price, the higher your ROI will be. However, you don't want to overpay for the shares either. Be sure to research the company and the industry before making a decision on what price you are willing to pay.
2. The number of shares you are buying. The more shares you buy, the higher your ROI will be. But don't forget, you will also have more risk because you have more money invested.
3. The fees associated with the IPO. Make sure you are aware of all the fees involved in the IPO, such as underwriting fees, legal fees, and so on. These fees can eat into your profits and lower your overall ROI.
4. The timing of the IPO. When you sell your shares will also affect your ROI. If you sell too soon, you may miss out on potential profits. If you hold onto the shares for too long, you may end up losing money if the share price falls.
5. The overall market conditions. The stock market is always changing and these changes can impact your ROI from an IPO. Be sure to pay attention to the overall market conditions before making any decisions.
Calculating your expected ROI from an IPO can be a complex process. But if you do your homework and take all of these factors into account, you can increase your chances of making a profit from an IPO investment.
How do you calculate your expected return on investment ROI during an IPO - Explaining Initial Public Offering Basics to startups
When a company decides to go public through an IPO, there are a number of important considerations that need to be taken into account. Going public is a big decision and one that should not be taken lightly. The following are some important things to consider when making the decision to go public:
1. The first and foremost consideration is whether going public is the right move for the company. There are a number of factors to take into account when making this decision, such as the company's size, growth prospects, and financial stability.
2. Once it is decided that going public is the right move for the company, the next step is to choose the right time to do it. Timing is critical when going public and companies need to make sure that they are ready for the increased scrutiny that comes with being a public company.
3. Another important consideration is what type of IPO to pursue. There are two main types of ipos : a traditional IPO and a reverse merger. Each has its own pros and cons and companies need to carefully consider which option is best for them.
4. The last major consideration is what impact going public will have on the company's existing shareholders. Before going public, it is important to understand how dilution will affect existing shareholders and what their rights will be after the IPO.
Going public through an IPO is a big decision that should not be taken lightly. There are a number of important considerations that need to be taken into account when making the decision to go public. By taking the time to carefully consider all of these factors, companies can ensure that they are making the best decision for their business.
What are some important considerations when making a decision to go through an IPO - Explaining Initial Public Offering Basics to startups
Most startups will never go public. In fact, only a tiny fraction of companies will ever file an IPO. But for those that do, it's important to understand the process and what's involved.
The first step is to file a registration statement with the sec . This is a lengthy document that provides information about the company, its financials, and its plans for going public. The registration statement is filed confidentially, which means that it's not available to the public.
Once the registration statement is filed, the company will start meeting with potential investors . These are typically institutional investors, such as pension funds and hedge funds . The purpose of these meetings is to generate interest in the IPO and to get feedback on the company's plans.
Once the roadshow is complete, the company will set a price for the IPO and begin selling shares to the public. The IPO price is typically set at the high end of the range that was discussed with potential investors during the roadshow.
After the IPO, the company will be required to disclose more information on a regular basis. This includes filing quarterly reports with the SEC and holding annual shareholder meetings.
So how can startups use this information to make informed decisions about IPOs? First, it's important to understand that most startups will never go public. Second, even for those that do file an IPO, it's still a long shot that the company will be successful. Third, going public is a complex process with a lot of moving parts. And fourth, once a company goes public, it will be subject to more scrutiny and will be required to disclose more information on a regular basis.
Finding investors for your early-stage startup is no longer difficult
FasterCapital's team works with you on planning for your early-funding round and helps you get matched with angels and VCs based on your startup's stage, location and industry
It's no secret that many startups struggle after going public. In fact, a study by the University of Florida found that startup companies are about twice as likely to fail in the first two years after their IPO than they are in the five years leading up to it.
There are a number of reasons why this is the case, but one of the most common is that startups tend to make a number of avoidable mistakes during and after their IPO. Here are four of the most common mistakes and how to avoid them:
1. Not Having a Plan B
One of the most common mistakes startups make is not having a plan B. This is often because they are so focused on getting their business off the ground that they don't have time to think about what they would do if things went wrong.
However, it's important to have a contingency plan in place in case your IPO doesn't go as planned. This could include having another funding round lined up or scaling back your operations.
Another mistake that startups often make is over-hiring. This is often done in an attempt to keep up with the growth of the company. However, it can lead to problems if the company isn't able to generate enough revenue to support the additional staff.
It's important to carefully consider your hiring needs and only bring on new staff when it is absolutely necessary.
3. Failing to Diversify
Many startups also make the mistake of failing to diversify their products or services. This can be a problem if the company's primary product or service fails to live up to expectations.
It's important to have a diverse product portfolio that can appeal to different markets. This will help reduce the risk of failure if one of your products doesn't perform as well as expected.
4. Ignoring Your Shareholders
Finally, many startups make the mistake of ignoring their shareholders after going public. This is often because they are so focused on running the business that they forget about the people who helped them get there.
However, it's important to keep your shareholders happy by providing them with regular updates on the company's progress and financial performance. You should also give them a say in major decisions affecting the company, such as changes to the board of directors.
Avoiding these mistakes will help you increase your chances of success after going public.
Can startups avoid common mistakes during and after their IPO - Explaining Initial Public Offering Basics to startups
Read Other Blogs
Bond valuation models are essential tools for investors to determine the fair price of a bond....
Understanding the Importance of Productivity for Businesses In today's fast-paced and competitive...
Switzerland's Six Swiss Exchange is the country's principal stock exchange and one of the world's...
Electronic Federal Tax Payment System (EFTPS) is a free and secure online payment system that...
ETFs, or exchange-traded funds, have become increasingly popular among passive investors in recent...
1. The Importance of Branding in the Beauty Industry In the competitive world of the beauty...
There are many reasons to start a business. Some people want to be their own boss, some want to...
A startup is a company or organization in its early stages, typically characterized by high...
In today's fast-paced world, where financial stability is a top priority for individuals and...
Initial Public Offerings (IPOs)
Written by True Tamplin, BSc, CEPF®
Reviewed by subject matter experts.
Updated on June 08, 2023
Ask a Financial Professional Any Question
Table of contents, what are initial public offerings (ipos).
Initial Public Offerings (IPOs) are the first sale of stock by a private company to the public. Companies can use it to raise new equity capital for expansion or other purposes.
IPOs are often associated with high-growth companies, and there are several reasons why companies may choose to go public.
Going public can provide a company with new capital to invest in growth, help to expand its operations, and make it more visible to potential customers and partners.
When a private company goes public, it is an opportune moment for original private investors to profit from their investment . This is usually done by issuing shares at a premium price, which lets public investors get in on the action too.
How Do IPOs Work?
When a firm reaches a certain point in its development where it needs to raise capital , one option it may consider is an initial public offering.
A private company going public raises money by issuing and selling shares of itself in a process called an IPO.
It is a massive undertaking for a private company because it must now answer to shareholders, provide regular financial reports, and comply with the Securities and Exchange Commission (SEC) regulations.
The company also undergoes a significant change in ownership structure, from private ownership to public ownership.
Typically, when a company's private valuation reaches around $1 billion, it is often ready to go public.
This is known as unicorn status. Private firms at various valuations with strong fundamentals and demonstrated profitability potential can also qualify for an IPO, depending on the market competition and their capacity to satisfy listing standards.
To pull off an IPO, the company must first determine how many shares to sell and at what price. This is done through a process of share underwriting , where investment banks commit to buying up the securities of the issuing entity and then sell them in the market.
The number of shares and the price at which they are sold will determine the amount of money the company raises in its IPO. The shareholders’ equity will also increase by the amount of money raised in the IPO.
The money raised from an IPO can be used to finance operations, expand businesses, or pay off debt.
Overall, an IPO is a significant event for any company. It is a complex process that requires careful planning and execution. But it can also be rewarding, providing the company with much needed capital to grow its business.
History of IPOs
IPOs have been around for centuries. In 1602, the Dutch East India Company was the first company to offer shares to the public.
There have been many notable IPOs throughout history. Some examples are the First Bank of the United States IPO in 1791 and the IPO of The Coca-Cola Company in 1919.
One notable example of a modern company that went public through an IPO is Facebook. Facebook's IPO took place on May 18, 2012. Facebook's IPO was the most significant in the history of technology IPOs.
Today, IPOs are a common and critical source of capital for high-growth companies. In 2019, there were more than 1,000 IPOs globally , raising a total of more than $100 billion.
The IPO Process
The process of going public can be complex and time-consuming, and it typically involves the services of investment bankers, lawyers, and accountants.
The following are the steps involved in the IPO process:
Step 1: Proposal Creation
The first step is to develop a proposal or so-called "book" that outlines the company's business plan, financial situation, and investment opportunity. This book is then sent to potential underwriters, who are banks or securities firms that help sell the stock to investors.
Step 2: Underwriting Selection
Once an underwriter is selected, the company and underwriter will sign an agreement in which the underwriter agrees to buy all of the shares being offered by the company at a set price (the "offer price").
The agreement also typically includes an "over-allotment option," which gives the underwriter the right to purchase additional shares (up to 15% of the total offering) if demand for the stock is high.
Step 3: Team Assembly
After the underwriting agreement is in place, the IPO team (which typically includes investment bankers, lawyers, and accountants) works on putting together the necessary paperwork for the SEC filing.
Step 4: SEC Filings
The company must file a registration statement with the SEC, which outlines the terms of the offering and discloses information about the company's business, financial situation, and risk factors.
The registration statement becomes effective after it is reviewed and declared effective by the SEC.
Step 5: Road Show Marketing
After the SEC has cleared the offering, the underwriter will go on a "road show" to market the stock to potential investors.
During this time, the company's management team will meet with institutional investors, such as mutual fund managers and pension funds, to try to get them interested in buying the stock.
Step 6: Pricing
The investment banks set the IPO price based on their assessment of investor demand. Once the offering price is set, the company will sell its shares to the underwriters at that price.
Step 7: Trading
The shares are then distributed to the underwriters' clients, and trading of the stock begins on the open market. Institutional investors often buy large blocks of stock when a company goes public, so they can sell them later at a profit. Individual investors can also participate in IPOs by buying shares through a broker.
Step 8: Post-IPO
After an IPO, some clauses may be put into place- for example, underwriters may have a set amount of time to buy more shares after the IPO date. However, certain investors might fall under quiet periods during this time.
The company will then be required to file periodic financial reports with the SEC. The company's stock will also be listed on a stock exchange, such as the NYSE or Nasdaq .
The company will now be subject to all the rules and regulations that apply to public companies.
Benefits of an IPO
IPOs can provide a number of benefits to companies, including the following:
Access to Capital
IPOs can be a significant source of capital for high-growth companies. The proceeds from an IPO can be used to finance expansion, pay off debt, or for general corporate purposes.
Enhanced Visibility and Credibility
Going public can increase a company's visibility and give it more credibility with customers, suppliers, and employees. It can also make it easier to attract top talent.
Increased Shareholder Value
An IPO can create shareholder value by providing liquidity for early investors and founders and by giving the company access to a larger pool of potential investors.
Drawbacks of an IPO
Some risks and drawbacks are associated with going public via an IPO.
Costly and Time-Consuming
The IPO process can be costly and time-consuming, and there is no guarantee that the offering will be successful. Costs are borne by the company, not the underwriters.
Once a company goes public, it will be subject to increased SEC scrutiny and will be required to disclose more information about its business. This can make it more difficult to operate in a competitive environment.
Loss of Control
Going public typically means that a company will have to give up some control. For example, shareholders will have a say in major decisions, and the company will be subject to greater scrutiny from regulators, the media, and the public.
Volatile Stock Price
The stock price of a newly public company can be volatile, particularly in the first few months after the IPO. This can create concerns for management and make it difficult to raise additional capital.
Pressure to Perform
Public companies are under pressure to maintain or increase their stock price and meet quarterly earnings estimates. This can lead to short-term decision making and pressure on management.
Performance of IPOs
Several factors can affect the performance of an IPO, including the economic conditions at the time of the offering, the company's financial condition, the sector in which it operates, and investor sentiment.
In general, IPOs tend to perform poorly in bear markets and during periods of economic uncertainty. They also tend to underperform the market in the short term, but there is evidence that they outperform over the long term .
The following are some of the key considerations for IPO performance:
The lock-up period is the time after the IPO when insiders (such as employees and early investors) are prohibited from selling their shares. This period typically lasts 180 days, with a minimum of 90 days per SEC law.
After the lock-up period expires, a "flood" of insider selling can put downward pressure on the stock price.
The SEC's "quiet period" regulations restrict a company's ability to promote its IPO in the weeks following the offering. As a result, there is typically a lull in news and excitement surrounding a company in the weeks before its IPO.
This can lead to lower than expected demand and poor performance on the first day of trading.
Flipping is the practice of buying shares in an IPO and then selling them immediately after the stock begins trading. This can lead to a decline in the stock price as demand from long-term investors is replaced by supply from flippers looking to make a quick profit.
Upcoming IPOs in 2023
Several notable companies have filed for IPOs, including the following:
- Discord is a gaming communication platform that allows gamers to chat, voice call, and video call each other. It was founded in 2015, and the company has its headquarters in San Francisco, CA. It has not announced an IPO date yet but is expected to do so in the near future. This will be a highly anticipated event , as Discord has a large and loyal following.
- Reddit is an online forum where people can share links and discuss topics of interest. This forum has more than 330 million active users monthly. Reddit filed confidentially for its IPO and is expected to be one of the largest IPOs when it launches.
- Stripe is a financial technology company that provides payment processing services for online businesses. In May 2021, the company conducted a $600 million funding round where they actually valued the company at $95 billion.
To stay updated on upcoming IPOs, check out an IPO calendar, which lists all of the upcoming IPOs. They can be found on many different websites, such as Yahoo! Finance and Nasdaq .
Another way to find out about upcoming IPOs is to sign up for email alerts from sites like IPO Monitor . This way, you will be among the first to know when a new IPO is announced.
The Bottom Line
An IPO can be an excellent way for a company to raise capital, but it also comes with some risks and drawbacks.
The advantages could include a large influx of cash for the company, increased visibility, and a boost in prestige.
The disadvantages could include giving up some control of the company, higher expenses , and greater scrutiny.
Before going public, a company should carefully consider the pros and cons of an IPO and ensure that it is the right move for the business.
Initial Public Offerings (IPOs) FAQs
Do ipos have a first come, first serve basis.
IPOs are not first come, first serve. Instead, they are allocated based on demand from investors.
Is investing in an IPO good?
There is no guaranteed answer, as it depends on the company and the market conditions at the time of the offering. IPOs tend to underperform in the short term but outperform over the long term.
What is the benefit of buying an IPO?
The primary benefit of buying an IPO is that you get in on the ground floor of a company with high growth potential.
How do you make money from an IPO?
You can make money from an IPO by buying shares at the IPO price and then selling them later at a higher price. During the first public offering, investors typically purchase firm shares at a price below the market price. Then, during the public auction, the value of the business's shares may increase. If the company is already well-established worldwide, its initial public offering may generate a frenzy and price surge.
Are IPOs high risk?
IPOs are considered high risk because the company has no track record, and its stock price can be unpredictable in the early days of trading.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website , view his author profile on Amazon , or check out his speaker profile on the CFA Institute website .
- Direct Listing
- Dutch Auction
- Follow-on Offering
- Follow-On Public Offer (FPO)
- General Public Distribution (GPD)
- How Do IPOs Work
- How to Buy IPO Stock
- Lock-Up Agreement
- Offering Circular
- Offering Price
- Pre-Initial Public Offering (Pre-IPO)
- Secondary Offerings
Find Wealth Management Firms Near You
Find advisor near you, our recommended advisors.
Taylor Kovar, CFP®
WHY WE RECOMMEND:
Fee-Only Financial Advisor Show explanation
Certified financial planner™, 3x investopedia top 100 advisor, author of the 5 money personalities & keynote speaker.
Business Owners, Executives & Medical Professionals
Strategic Planning, Alternative Investments, Stock Options & Wealth Preservation
Fee only financial advisor show explanation, bilingual in english / spanish, founder of wisedollarmom.com, quoted in gobanking rates, yahoo finance & forbes.
Retirees, Immigrants & Sudden Wealth / Inheritance
Retirement Planning, Personal finance, Goals-based Planning & Community Impact
At Finance Strategists, we partner with financial experts to ensure the accuracy of our financial content.
Our team of reviewers are established professionals with decades of experience in areas of personal finance and hold many advanced degrees and certifications.
They regularly contribute to top tier financial publications, such as The Wall Street Journal, U.S. News & World Report, Reuters, Morning Star, Yahoo Finance, Bloomberg, Marketwatch, Investopedia, TheStreet.com, Motley Fool, CNBC, and many others.
This team of experts helps Finance Strategists maintain the highest level of accuracy and professionalism possible.
Why You Can Trust Finance Strategists
Finance Strategists is a leading financial education organization that connects people with financial professionals, priding itself on providing accurate and reliable financial information to millions of readers each year.
We follow strict ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources.
Our goal is to deliver the most understandable and comprehensive explanations of financial topics using simple writing complemented by helpful graphics and animation videos.
Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications. Our work has been directly cited by organizations including Entrepreneur, Business Insider, Investopedia, Forbes, CNBC, and many others.
Our mission is to empower readers with the most factual and reliable financial information possible to help them make informed decisions for their individual needs.
How It Works
Step 1 of 3, create a free account and ask any financial question.
Ask a question about your financial situation providing as much detail as possible. Your information is kept secure and not shared unless you specify.
Step 2 of 3
Our team will connect you with a vetted, trusted professional.
Someone on our team will connect you with a financial professional in our network holding the correct designation and expertise.
Step 3 of 3
Get your questions answered and book a free call if necessary.
A financial professional will offer guidance based on the information provided and offer a no-obligation call to better understand your situation.
Ask Any Financial Question
Where should we send your answer.
Tell us more about yourself, is there any other context you can provide.
Pro tip: Professionals are more likely to answer questions when background and context is given. The more details you provide, the faster and more thorough reply you'll receive.
What is your age?
Are you married, do you own your home.
- Owned outright
- Owned with a mortgage
Do you have any children under 18?
- Yes, 3 or more
What is the approximate value of your cash savings and other investments?
- 0 - $50,000
- $50,000 - $250,000
- $250,000 - $1m
Pro tip: A portfolio often becomes more complicated when it has more investable assets. Please answer this question to help us connect you with the right professional.
Would you prefer to work with a financial professional remotely or in-person?
- I would prefer remote (video call, etc.)
- I would prefer in-person
- I don't mind, either are fine
What's your zip code?
- I'm not in the U.S.
Finish your free account setup.
Your privacy is a top priority. We never sell your information or disclose it to 3rd parties.
Thank you for submitting your question.
A financial professional should be reaching out shortly. In the meantime, here are a few articles that may be related to your question:
Part 1: Tell Us More About Yourself
Do you own a business, which activity is most important to you during retirement.
- Giving back / charity
- Spending time with family and friends
- Pursuing hobbies
Part 2: Your Current Nest Egg
Part 3: confidence going into retirement, how comfortable are you with investing.
- Very comfortable
- Somewhat comfortable
- Not comfortable at all
How confident are you in your long term financial plan?
- Very confident
- Somewhat confident
- Not confident / I don't have a plan
What is your risk tolerance?
How much are you saving for retirement each month.
- None currently
- Minimal: $50 - $200
- Steady Saver: $200 - $500
- Serious Planner: $500 - $1,000
- Aggressive Saver: $1,000+
How much will you need each month during retirement?
- Bare Necessities: $1,500 - $2,500
- Moderate Comfort: $2,500 - $3,500
- Comfortable Lifestyle: $3,500 - $5,500
- Affluent Living: $5,500 - $8,000
- Luxury Lifestyle: $8,000+
Part 4: Getting Your Retirement Ready
What is your current financial priority.
- Getting out of debt
- Growing my wealth
- Protecting my wealth
Do you already work with a financial advisor?
Which of these is most important for your financial advisor to have.
- Tax planning expertise
- Investment management expertise
- Estate planning expertise
- None of the above
Great! Your retirement-ready report is on its way.
Get in touch with, great the financial professional will get back to you soon..
A financial professional should be reaching out shortly. In the meantime, here are a few articles that might be of interest to you:
Where Should We Send The Downloadable File?
Great your downloadable file should be in your email soon..
In the meantime, here are a few articles that might be of interest to you: