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Whenever a company makes the decision to go public , its first task is to select the underwriters.
Underwriters act as financial midwives to a new issue.
Usually they play a triple role : First they provide the company with procedural and financial advice , then they buy the issue , and finally they resell it to the public.
Established underwriters are careful of their reputation and will not handle a new issue unless they believe the facts have been presented fairly.
Thus , in addition to handling the sale of a company � s issue , the underwriters in effect give their seal of approval to it.
They prepare a registration statement for the approval of the Securities and Exchange Commission ( SEC ).
In addition to registering the issue with the SEC , they need to check that the issue complies with the so-called blue-sky laws of each state that regulate sales of securities within the state.
While the registration statement is awaiting approval , underwriters begin to firm up the issue price.
They arrange a road show to talk to potential investors.
Immediately after they receive clearance from the SEC , underwriters fix the issue price.
After that they enter into a firm commitment to buy the stock and then offer it to the public , when they haven � t still found any reason not to do it . |