FIN 260 Lecture Notes - Lecture 60: Underwriting, Boston Market
• IPO’s:
➢ Issuing an IPO:
1. Firms usually sell 20-40% of their stock to the public in an IPO.
2. Underwriters price stock, file with the SEC, & conduct a due diligence
investigation of the company.
3. Historically, there has been little competition among underwriters in
terms of offering discounts.
o Most companies pick underwriter on basis of experience in IPOs,
particularly in the same industry.
4. One consideration in choice of underwriter is the firm has well-respected
analysts who provide research reports to the public in the years ahead.
5. Some of the most well-known underwriters are/were:
o Merrill Lynch
o Goldman Sachs
o CSFB
o BT Alex
o Brown
6. After preliminary prospectus, company management & underwriters
conduct a marketing campaign for the IPO.
o Sometimes called a Red Herring, since on the front page are warnings
that are required to written in red.
7. The marketing effort includes a road show to major cities where
presentations are made.
o Institutional investors
o Mutual funds
o Major investors
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