The Process of Ipo

3185 WordsJan 28, 201313 Pages
A Guide to the Initial Public Offering Process Katrina Ellis (kle3@cornel.edu) Roni Michaely (rm34@cornell.edu) and Maureen O’Hara (mo19@cornell.edu) January 1999 *All Authors are from Cornell University, Johnson Graduate School of Management, Cornell University Ithaca NY 14853. Michaely is also affiliated with Tel-Aviv University. A Guide to the Initial Public Offering Process A milestone for any company is the issuance of publicly traded stock. While the motivations for an initial public offering are straightforward, the mechanism for doing so is complex. In this paper, we outline the process by which companies are brought to market in an initial public offering. Our goals here are to delineate the specific steps…show more content…
1 The power of Congress to enact legislation regulating securities transactions is based in the Commerce Clause of the constitution. The Commerce Clause which is contained in Article I, Section 8 of the constitution gives Congress the power “to regulate commerce … among the several states …” So long as a transaction makes use of “any means or instruments of transportation or communication in interstate commerce”, it will fall within the reach of the federal securities laws. This includes the use of telephones and the mails. It is rare that a transaction will not use some instrumentality of interstate commerce and will thus fall outside the reach of the law. In addition, Congress has given the Securities and Exchange Commission the authority to administer the securities laws and to promulgate rules and regulations to supplement its enforcement powers. These additional rules are necessary to clarify statutes that are vague or ambiguous or to make substantive additions to the statutes so long as they are not inconsistent with the legislatively enacted statutes. In addition to the federal laws, the states all have their own securities laws, 4 To achieve this, the underwriter has a “due diligence” requirement to investigate the company and verify the information it provides about the company to investors. The Securities Act also makes it illegal to offer or sell securities to the public unless they have first been registered.
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