Which companies will go public in 2014?

How does an IPO work?

A stock corporation issues securities (issue) and sells them on the stock exchange. This means that shares in the company become the property of investors.

The abbreviation IPO has established itself for this securities placement on the stock exchange. It stands for “Initial Public Offering”, the first public offer. In general, an IPO is associated with admission to the stock exchange and admission to stock exchange trading.

Why do public companies go public?

One of the most important motivations for going public is for a company to get fresh money by issuing shares. This capital can be used, for example, to finance a new, promising project or a new factory. Other reasons are, for example, that the company name is becoming better known and the company is becoming more attractive for new employees and managers. This increases competitiveness compared to the competition.

In the case of an IPO, the company invests investors in the company. The new shareholders are injecting fresh money into the company for this. If business is going well, you will receive a share of the profits in the form of a dividend and can benefit from price gains. If business is not going well, there is no dividend.

If a company wants to go public, it must have the legal form of a stock corporation (AG). As a rule, the company commissions various banks (consortium) to carry out the IPO for the stock corporation. IPOs are usually time-consuming and associated with considerable costs. That is why companies are carefully considering whether to take this step. Only five companies dared to do it in Germany in 2016, 15 in 2015 and eight in 2014.

What does a new share cost?

The price that can be achieved for a company's shares when it is sold depends on both the company's estimated value and the current market situation on the stock exchanges. A fixed price procedure is possible in which the shares are offered at a fixed price.

If the shares are not to be offered at a fixed price, a bookbuilding or auction process is usually used, in which a price range (minimum / maximum price) is set. In an auction, investors must say in advance what the maximum value the share would be to them. The actual issue price is then calculated from the average of these bids. The aim is to achieve a fair price in this way.

In times of booming markets, it is often not that easy to get hold of securities at an IPO. Issues are often oversubscribed - which means that more investors want to buy shares than are even offered. The banks of the consortium then determine the allocation in coordination with the company, so that all investors are treated as fairly as possible.

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Keywords: share, shares, share trading, stock market, initial public offering, IPO