Business Startups Seeking an Initial Public Offering
What is an Initial Public Offering “IPO”?
Most of us are familiar with the term IPO but few of us really understand what it means. An IPO is when a private company, for the first time in its history, offers shares of itself to investors and issues stock in exchange, at which time the company transforms into a public company. Thus, the term Initial Public Offering. Off course there are lots more technicalities but the jest is to raise capital.
Most business startups seek to IPO at some time; however, in order to be ripe for an IPO there are many hurdles that the company must overcome. In essence, the company must substantiate that it is live, well, and profitable. At this time most companies IPO by approaching an investment bank to underwrite the process. An underwriter basically values the shares of the company and creates the medium to offer the shares to the public.
Does a Business Have to Comply With Specific Regulations?
There are different types of investment funds and vary based on the level of regulation, objectives, and type of authorized investments. The Investment Company Act (ICA) regulates investment companies. ICA defines an investment company as issuer of securities that is engaged, holds itself out as being engaged, or proposes to engage primarily in the business of investing, reinvesting or trading securities. Generally, investment companies under ICA are heavily regulated and must register with the Securities and Exchange Commission (SEC). Startups that are looking for investors or are seeking to provide an initial public offering may be subject to SEC regulations. It’s imperative that business understand and comply with SEC, as well as other regulations.
If you are in the process of or are interested in providing an initial public offering, request a consultation with a Los Angeles Business Startup Attorney. Our attorneys will consult and inform you about the various regulations and steps you must take in order to fulfil your business’ objective.
If you would like to learn more, here is an article on IPO that Hilton Hotels initiated.
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