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IPO Initial Public Offering

The Process of becoming a Public Company

“Going public” is the process of causing the securities of a corporation to trade on a United States stock exchange or stock market, such as the NASD OTC Bulletin Board. It normally involves the filing of a registration statement with the Securities and Exchange Commission and a listing application to the trading market.

The principal steps to become public involve the following:

Preparing the company to become public. This typically includes increasing the amount and type of stock and other securities the company is authorized to issue, preparing employment and other agreements with executives and employees, establishing subcommittees of the board of directors, and engaging a qualified accounting firm.

Preparation of the registration statement. A registration statement is a detailed description of the company, its history and intentions, its management, its strengths and weaknesses, and its securities being registered. This document, containing financial statements, is submitted to the Securities and Exchange Commission.

Processing of the registration statement. The Securities and Exchange Commission reviews registration statements and issues request for changes and additions through “letters of comment” to the company. Revisions to the registration statement are made until the Securities and Exchange Commission is satisfied, at which time it declares the registration statement “effective”.

The filing of a listing application. Registered securities may be sold on various stock exchanges, such as the American or New York Stock Exchange or regional exchanges, or on other markets such as the NASD OTC Bulletin Board. The listing application may be filed before the registration statement is declared effective, which can shorten the time for approval following effectiveness.

Establishment of relations with market makers. Public securities are traded in the United States through specialists on the exchanges, and through market makers on the NASD OTC Bulletin Board. Smaller companies normally first trade on the NASD OTC Bulletin Board or other similar markets.

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