c c
c

There Is A Flourishing Market For Public Issues In India. The Instruments

Commonly Offered In The Primary Market Are Equity, Debentures, And A
Variety Of Convertibles Including Debentures Bundled With Warrants. Public
Issues Are Made By Both Private And Public Sector Companies. Unlike Many
Other Countries, Where Issues Are Privately Placed, Public Issues In India Are
Directly Marketed To Retail Investors All Over The Country.
Investment Returns Of The Indian Primary Market Have Been Condensed
Largely During 2007-08 And 2008-09. Associated Chambers Of Commerce And
Industry Of India (ASSOCHAM) Found That Retail Investors And Financial
Institutions Including Foreign Institutions (Fiis), Are Gradually Withdrawing From
The Capital Market Particularly From Initial Public Offerings (Ipos).
Since The Current Market Sentiments Are Not Positive Many Investors Are
Exploring Other Options Such As Bond, Mutual Funds And Security Markets As
Demand For Raising Ipos Has Been Subsiding A Great Deal," The ASSOCHAM
Analysis Said. "Fiis Are Pulling Out Of Ipos Because Of High Inflation, And
Alongside, The Debt And Bond Markets Are Growing Phenomenally,"
ASSOCHAM President Sajjan Jindal Said. "The Price Band Of IPO Is Also No
Longer Attractive For Retail Investors. Under Such Circumstances, Being
Optimistic About IPO Market Would Not Be Realistic As The Fear Factor Against
The Primary Market Is Becoming More Visible And Pronounced," Jindal Added.
At Least 74 Companies Which Were Close To Going For Ipos And Collectively
Raise Rs 440 Billion (Rs 44,000 Crore) Are Now Awaiting Better Times.



 r
r 
 

·p It Is Related With New Issues

·p It Has No Particular Place

·p It Has Various Methods Of Float Capital: Following are the methods of

raising capital in the primary market:

i) Public Issue

ii) Offer For Sale

iii) Private Placement

iv) Right Issue

v) Electronic-Initial Public Offer

·p It comes before Secondary Market


 V
rrr 
The Research On Indian Primary Market, Has Been Carried Out To Find
The Performance Of IPO In India Between 2009-2010. During The Period There
Were 275 IPO Issues. The Study Includes Sample Of 71 New Equity Issues
Offered During The Study Period.
The Data Has Been Collected From NSE Web Site. The Study Examined
The Performance Of The Ipos Both
·p In The Short-Run As Well As
·p In The Long-Run,
Where Short-Run Means The Behavior Of Initial Returns Up On Listing. Short
Term Performance Has Been Studied By Examining Offer-To-Open Returns, Offer
To High ,Offer To Low And Offer To Average Price, Which Will Give Us A Clear
Idea Of How Much The IPO Gained Or Lost Up On Opening Trades And An Intra
Day Return On The Listing Day.
Ipos Long Run Performance Is Measured By Examining The Returns
Beyond The Second Day Of Their Listing At Monthly Intervals Till 2010 Subject
To A Maximum Of 60 Months.





rr 
 

The Present Study Involves An Analysis Of Various Primary Market And IPO. New
Issue Of Shares And Debt Securities Are Made In The Primary Market. Thus, Whenever A
Company Has To Raise Funds, It Approaches The Primary Market With One Of The Three
Options:-
Public Issue
Rights Issue
Private Placement
An Initial Public Offer (IPO) Is The Selling Of Securities To The Public In The Primary Market
By The Unlisted Companies Either A Fresh Issue Of Securities Or An Offer For Sale Of Existing
Securities Are Both For The First Time To The Public.
The Indian IPO Market Is One Of The Promising Markets For The Investors. During The
Period 1993-94 To 2009-10 4,538 Companies Had Been Raised Rs.1, 49,671 Crore From The
Primary Market Through Ipos. Resources Rose Through Public Issues Declined By 91.5 Per
Cent To Rs. 2,031 Crore During Jan-Feb 2010 Over Those In The Corresponding Period Of Last
Year. The Number Of Issues Declined From 24 In Jan-Feb 2009 To 15 In Jan-Feb 2010. The
Average Size Of Public Issues Also Declined To Rs.135 Crore During From Jan-Feb 2010
Rs.994 Crore During In Jan-Feb 2009.


 4r 

The  V Is That Part Of The Capital Markets That Deals With The Issuance Of
New Securities. Companies, Governments Or Public Sector Institutions Can Obtain Funding
Through The Sale Of A New Stock Or Bond Issue. This Is Typically Done Through A Syndicate
Of Securities Dealers. The Process Of Selling New Issues To Investors Is Called Underwriting.
In The Case Of A New Stock Issue, This Sale Is An Initial Public Offering (IPO). Dealers Earn
A Commission That Is Built Into The Price Of The Security Offering, Though It Can Be Found
In The Prospectus. Primary Markets Creates Long Term Instruments Through Which Corporate
Entities Borrow From Capital Market.

Features Of Primary Markets Are:

yp This Is The Market For New Long Term Equity Capital. The Primary Market Is The
Market Where The Securities Are Sold For The First Time. Therefore It Is Also Called
The New Issue Market (NIM).
yp In A Primary Issue, The Securities Are Issued By The Company Directly To Investors.
yp The Company Receives The Money And Issues New Security Certificates To The
Investors.
yp Primary Issues Are Used By Companies For The Purpose Of Setting Up New Business
Or For Expanding Or Modernizing The Existing Business.
yp The Primary Market Performs The Crucial Function Of Facilitating Capital Formation In
The Economy.
yp The New Issue Market Does Not Include Certain Other Sources Of New Long Term
External Finance, Such As Loans From Financial Institutions. Borrowers In The New
Issue Market May Be Raising Capital For Converting Private Capital Into Public Capital;
This Is Known As "Going Public."
yp The Financial Assets Sold Can Only Be Redeemed By The Original Holder.
  r!!"

An    r!!" (#$), Referred To Simply As An "Offering" Or "Flotation", Is

When A Company (Called The Issuer) Issues Common Stock Or Shares To The Public For The
First Time. They Are Often Issued By Smaller, Younger Companies Seeking Capital To Expand,
But Can Also Be Done By Large Privately Owned Companies Looking To Become Publicly
Traded.

In An Ipo The Issuer May Obtain The Assistance Of An Underwriting Firm, Which Helps It
Determine What Type Of Security To Issue (Common Or Preferred), Best Offering Price And
Time To Bring It To Market.

An Ipo Can Be A Risky Investment. For The Individual Investor It Is Tough To Predict What
The Stock Or Shares Will Do On Its Initial Day Of Trading And In The Near Future Since There
Is Often Little Historical Data With Which To Analyze The Company. Also, Most Ipos Are Of
Companies Going Through A Transitory Growth Period, And They Are Therefore Subject To
Additional Uncertainty Regarding Their Future Value.

r 

%$% $%"

When A Company Lists Its Comodites On A Public Exchange, It Will Almost Invariably Look
To Issue Additional New Shares In Order At The Same Time. The Money Paid By Investors For
The Newly-Issued Shares Goes Directly To The Company (In Contrast To A Later Trade Of
Shares On The Exchange, Where The Money Passes Between Investors). An IPO, Therefore,
Allows A Company To Tap A Wide Pool Of Stock Market Investors To Provide It With Large
Volumes Of Capital For Future Growth. The Company Is Never Required To Repay The Capital,
But Instead The New Shareholders Have A Right To Future Profits Distributed By The
Company And The Right To A Capital Distribution In Case Of A Dissolution.

The Existing Shareholders Will See Their Shareholdings Diluted As A Proportion Of The
Company's Shares. However, They Hope That The Capital Investment Will Make Their
Shareholdings More Valuable In Absolute Terms.

In Addition, Once A Company Is Listed, It Will Be Able To Issue Further Shares Via A Rights
Issue, Thereby Again Providing Itself With Capital For Expansion Without Incurring Any Debt.
This Regular Ability To Raise Large Amounts Of Capital From The General Market, Rather
Than Having To Seek And Negotiate With Individual Investors, Is A Key Incentive For Many
Companies Seeking To List.

There Are Several Benefits To Being A Public Company, Namely:

yp Bolstering And Diversifying Equity Base

yp Enabling Cheaper Access To Capital
yp Exposure, Prestige And Public Image
yp Attracting And Retaining The Best Management And Employees Through Liquid Equity
Participation
yp Facilitating Acquisitions
yp Creating Multiple Financing Opportunities: Equity, Convertible Debt, Cheaper Bank
Loans, Etc.
yp Increased Liquidity For Equity Holder
yp Corporate Credibility

Once The Company Goes Public It Will Imply (I) Focus On Internal Controls And Disclosure
Controls, (Ii) Periodic Reporting Requirements And (Iii) Need To Implement Compliance
Programs.


r

Ipos Generally Involve One Or More Investment Banks Known As "Underwriters". The
Company Offering Its Shares, Called The "Issuer", Enters A Contract With A Lead Underwriter
To Sell Its Shares To The Public. The Underwriter Then Approaches Investors With Offers To
Sell These Shares.

The Sale (Allocation And Pricing) Of Shares In An IPO May Take Several Forms. Common
Methods Include:

yp Best efforts contract

yp Firm commitment contract
yp All-or-none contract
yp Bought deal
yp Dutch auction
yp Self distribution market

A Large IPO Is Usually Underwritten By A "Syndicate" Of Investment Banks Led By One Or

More Major Investment Banks (Lead Underwriter). Upon Selling The Shares, The Underwriters
Keep A Commission Based On A Percentage Of The Value Of The Shares Sold (Called The
Gross Spread). Usually, The Lead Underwriters, I.E. The Underwriters Selling The Largest
Proportions Of The IPO, Take The Highest Commissions²Up To 8% In Some Cases.

Multinational Ipos May Have As Many As Three Syndicates To Deal With Differing Legal
Requirements In Both The Issuer's Domestic Market And Other Regions. For Example, An
Issuer Based In The E.U. May Be Represented By The Main Selling Syndicate In Its Domestic
Market, Europe, In Addition To Separate Syndicates Or Selling Groups For US/Canada And For
Asia. Usually, The Lead Underwriter In The Main Selling Group Is Also The Lead Bank In The
Other Selling Groups.

Because Of The Wide Array Of Legal Requirements And Because It Is An Expensive Process,
Ipos Typically Involve One Or More Law Firms With Major Practices In Securities Law, Such
As The Magic Circle Firms Of London And The White Shoe Firms Of New York City.
Usually, The Offering Will Include The Issuance Of New Shares, Intended To Raise New
Capital, As Well The Secondary Sale Of Existing Shares. However, Certain Regulatory
Restrictions And Restrictions Imposed By The Lead Underwriter Are Often Placed On The Sale
Of Existing Shares.

Public Offerings Are Sold To Both Institutional Investors And Retail Clients Of Underwriters. A
Licensed Securities Salesperson ( Registered Representative In The USA And Canada ) Selling
Shares Of A Public Offering To His Clients Is Paid A Commission From Their Dealer Rather
Than Their Client. In Cases Where The Salesperson Is The Clients Advisor It Is Notable That
The Financial Incentives The Advisor And Client Are Not Aligned.

In The US Sales Can Only Be Made Through A Final Prospectus Cleared By The SEC.

Registered Representatives And Their Clients Rarely Read A Prospectus Or Preliminary

Prospectus For A New Issue. The Details Are Usually Provided To The Registered
Representative In The Form Of A Green Sheet So They Can Decide If They Would Like To
Market The Issue To Their Clients. A Green Sheet May Not Be Provided To Clients. Clients
Will Have Access To A Prospectus If They Wish To Analyze The Details Of The Offering
Before Making An Investment Decision.

Investment Dealers Will Often Initiate Research Coverage On Companies So Their Corporate
Finance Departments And Retail Divisions Can Attract And Market New Issues.

The Issuer Usually Allows The Underwriters An Option To Increase The Size Of The Offering
By Up To 15% Under Certain Circumstance Known As The Greenshoe Or Overallotment
Option

 $
This section &$%$ ! %$%$ %.
Please help improve this article by adding citations to reliable sources. Unsourced material may be
challenged and removed. V ecember 2006)

A venture capitalist named Bill Hambrecht has attempted to devise a method that can reduce the
inefficient process. He devised a way to issue shares through a Dutch auction as an attempt to
minimize the extreme underpricing that underwriters were nurturing. Underwriters, however,
have not taken to this strategy very well which is understandable given that auctions are
threatening large fees otherwise payable. Though not the first company to use Dutch auction,
Google is one established company that went public through the use of auction. Google's share
price rose 17% in its first day of trading despite the auction method. Brokers close to the IPO
report that the underwriters actively discouraged institutional investors from buying to reduce
demand and send the initial price down. The resulting low share price was then used to
"illustrate" that auctions generally don't work. Perception of IPOs can be controversial. For those
who view a successful IPO to be one that raises as much money as possible, the IPO was a total
failure. For those who view a successful IPO from the kind of investors that eventually gained
from the underpricing, the IPO was a complete success. It's important to note that different sets
of investors bid in auctions versus the open market²more institutions bid, fewer private
individuals bid. Google may be a special case, however, as many individual investors bought the
stock based on long-term valuation shortly after it launched its IPO, driving it beyond
institutional valuation.

 "
The underpricing of initial public offerings (IPO) has been well documented in different markets
(Ibbotson, 1975; Ritter 1984; Levis, 1990; McGuinness, 1992; Drucker and Puri, 2007). While
issuers always try to maximize their issue proceeds, the underpricing of IPOs has constituted a
serious anomaly in the literature of financial economics. Many financial economists have
developed different models to explain the underpricing of IPOs. Some of the models explained it
as a consequences of deliberate underpricing by issuers or their agents. In general, smaller issues
are observed to be underpriced more than large issues (Ritter, 1984, Ritter, 1991, Levis, 1990)

Historically, some of IPOs both globally and in the United States have been underpriced. The
effect of "initial underpricing" an IPO is to generate additional interest in the stock when it first
becomes publicly traded. Through flipping, this can lead to significant gains for investors who
have been allocated shares of the IPO at the offering price. However, underpricing an IPO results
in "money left on the table"²lost capital that could have been raised for the company had the
stock been offered at a higher price. One great example of all these factors at play was seen with
theglobe.com IPO which helped fuel the IPO mania of the late 90's internet era. Underwritten by
Bear Stearns on November 13, 1998, the stock had been priced at $9 per share, and famously
jumped 1000% at the opening of trading all the way up to $97, before deflating and closing at
$63 after large sell offs from institutions flipping the stock. Although the company did raise
about $30 million from the offering it is estimated that with the level of demand for the offering
and the volume of trading that took place the company might have left upwards of $200 million
on the table.

The danger of overpricing is also an important consideration. If a stock is offered to the public at
a higher price than the market will pay, the underwriters may have trouble meeting their
commitments to sell shares. Even if they sell all of the issued shares, if the stock falls in value on
the first day of trading, it may lose its marketability and hence even more of its value.
Underwriters, therefore, take many factors into consideration when pricing an IPO, and attempt
to reach an offering price that is low enough to stimulate interest in the stock, but high enough to
raise an adequate amount of capital for the company. The process of determining an optimal
price usually involves the underwriters ("syndicate") arranging share purchase commitments
from leading institutional investors.

On the other hand, some researchers (e.g. Geoffrey C., and C. Swift, 2009) believe that IPOs are
not being under-priced deliberately by issuers and/or underwriters, but the price-rocketing
phenomena on issuance days are due to investors' over-reaction.[2]

%%# 
A company that is planning an IPO appoints lead managers to help it decide on an appropriate
price at which the shares should be issued. There are two ways in which the price of an IPO can
be determined: either the company, with the help of its lead managers, fixes a price or the price is
arrived at through the process of book building.

Note: Not all IPOs are eligible for delivery settlement through the DTC system, which would
then either require the physical delivery of the stock certificates to the clearing agent bank's
custodian, or a delivery versus payment (DVP) arrangement with the selling group brokerage

'#$&
Vain article: Quiet period

There are two time windows commonly referred to as "quiet periods" during an IPO's history.
The first and the one linked above is the period of time following the filing of the company's S-1
but before SEC staff declare the registration statement effective. During this time, issuers,
company insiders, analysts, and other parties are legally restricted in their ability to discuss or
promote the upcoming IPO.[3]

The other "quiet period" refers to a period of 40 calendar days following an IPO's first day of
public trading. During this time, insiders and any underwriters involved in the IPO are restricted
from issuing any earnings forecasts or research reports for the company. Regulatory changes
enacted by the SEC as part of the Global Settlement enlarged the "quiet period" from 25 days to
40 days on July 9, 2002. When the quiet period is over, generally the underwriters will initiate
research coverage on the firm. Additionally, the NASD and NYSE have approved a rule
mandating a 10-day quiet period after a Secondary Offering and a 15-day quiet period both
before and after expiration of a "lock-up agreement" for a securities offering.


"#$!
"#$! is a stock market term used to describe a situation before and immediately after a
company's Initial public offering (or any new issue of shares). A %" is a party or individual
who subscribes to the new issue expecting the price of the stock to rise immediately upon the
start of trading. Thus, stag profit is the financial gain accumulated by the party or individual
resulting from the value of the shares rising.

For example, one might expect a certain I.T. company to do particularly well and purchase a
large volume of their stock or shares before flotation on the stock market. Once the price of the
shares has risen to a satisfactory level the person will choose to sell their shares and make

"%r%
Petrobras $70B in 2010:- Petrobras is the largest company in Latin America by market
capitalization and revenue, and the largest company headquartered in the Southern Hemisphere
by market value.[6][7][8] The company was founded in 1953, mainly due to the efforts of then
Brazilian President Getúlio Vargas. While the company ceased to be Brazil's legal monopolist in
the oil industry in 1997, it remains a significant oil producer, with output of more than 2 million
barrels of oil equivalent per day, as well as a major distributor of oil products.

The company also owns oil refineries and oil tankers. Petrobras is a world leader in development
of advanced technology from deep-water and ultra-deep water oil production.

($ %$))

Public (BM&F Bovespa:PETR3, PETR4

NYSE: PBR, PBRA
# 

BMAD: XPBR, XPBRA

MERVAL: APBR)

&%  Oil and Gasoline

 $&& (1953)

&*% Rio de Janeiro, Brazil

José Sergio Gabrielli de Azevedo (CEO)

+#$#
Almir Guilherme Barbassa (CFO)

Petroleum and derived products

$& % 
BR service stations
Lubrax motor oil

,  US$ 138.5 Billion (2010)[1]

- $ 
US$ 17.9 Billion (2010)[1]

r./%0  Brazilian Government (64%)[2]

#$% 
77,000[3]

BR Distribuidora, Petroquisa, Transpetro,

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Petrobras Energía, Braskem, among
others.[4]

% 
www.petrobras.com

yp

General Motors $23.1B in 2010:-V$$% (NYSE: GM, TSX: GMM.U) is an American

multinational automaker based in Detroit, Michigan and the world's second largest automaker.[3]
With its global headquarters in Detroit, GM employs 209,000 people in every major region of
the world and does business in some 157 countries. General Motors produces cars and trucks in
31 countries, and sells and services these vehicles through the following divisions: Buick,
Cadillac, Chevrolet, GMC, Opel, Vauxhall, and Holden. GM's OnStar subsidiary provides
vehicle safety, security and information services.
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Public (NYSE: GM)

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(TSX: GMM.U)

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Automotive

$&& September 16, 1908

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William C. Durant

Renaissance Center

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Daniel Akerson
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Automobiles
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Financial Services
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US$ 98.7 billion (Q1-Q3 2010)[1]

- $ 
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Agricultural Bank of China $22.1B in 2010:-"  $!1& ( ,

simplified Chinese: Î † † †
; traditional Chinese:
Î

; pinyin: ;hōngguó Nóngyè Yínháng), also known as " , is
one of the "Big Four" banks in the People's Republic of China. It was founded in 1951, and has
its headquarters in Beijing. It has branches throughout mainland China, and also in Hong Kong
and Singapore.

ABC has 320 million retail customers, 2.7 million corporate clients, and nearly 24,000 branches.
It is China's third largest lender by assets. ABC went public in mid-2010, fetching the world's

  



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as  (Chinese: ® ) (SEHK: 1299) is an insurance company based in Hong Kong.
It has offices in Asia-Pacific region including China, Australia, New Zealand, Japan, India,
Malaysia, Macau, South Korea, Thailand, Philippines, Singapore, Brunei and Vietnam.

It was a member of American International Group, but separated from the group in 2009 after it
was finalized that AIA as well as ALICO (another AIG subsidiary) were placed under the
administration of a Special Purpose Vehicle in exchange for the Federal Reserve Bank of New
York.[2]
According to the statistics from the Office of the Commissioner of Insurance (
),
AIA being the number 1 of Hong Kong insurance company in terms of the number of policies,
its market share in Hong Kong Insurance market (on Non-Linked Individual Business) is 26%
and sum assured worth more than 400 billion HKD (i.e. more than $ 50 billion).[3]

AIA was planned to be listed in Hong Kong Stock Exchange in April 2010. However, in March
2010, Prudential plc, a United Kingdom-based financial services company, announced that it will
buy AIA for $35.5 billion.[4] The purchased later fell through, and AIA held an IPO later in
October 2010 raising $20.51 billion, the third largest ever IPO.[5]

    

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Santander Brasil $8.9B in 2009:-  $& % (BM&F Bovespa: SANB11, SANB3,
SANB4 / NYSE: BSBR) is a subsidiary of Banco Santander in Brazil and its largest division in
Latin America and one of the world's most important accounting for 25% of the total profit of the
group. The bank was founded in 1982 in São Paulo, where their headquarters is located.

Banco Santander in Brazil, is the third largest private bank by assets, behind only the giant Itaú
Unibanco and Bradesco, but becomes the sixth largest to take into account the public and private
banks. With more than 9 million customers, operates in all segments of financial markets from a
network of 3696 branches and service centers and 18,312 ATMs

In 1997, the group acquired the Banco Geral do Comério S.A. The three acquisitions made in
subsequent years made the Santander Group earned position among the largest financial groups
in the sector in Brazil.

In 1998 he bought the Banco Noroeste SA, and in January 2000 the conglomerate was purchased
Southern Financial (Banks Meridional e Bozano, Simonsen). In November of that year,
Santander has bought control of Banespa.

Thus, with all acquisitions, the financial conglomerate Santander Banespa was formed in 2001,
with corporate restructuring. Banco Santander Hispano, the actions of Banespa became the
property of Santander S.A

In 2007 the Banco Santander participated along with the Royal Bank of Scotland and Fortis to
buy Dutch ABN AMRO and this operation Santander Brasil feature incorporate Banco Real
belonging to ABN AMRO in Brazil.

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% ) (pronunciation: 
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headquartered in 595 Market Street in San Francisco, California. It facilitates electronic funds
transfers throughout the world, most commonly through Visa-branded credit card and debit
cards.[3] Visa does not issue cards, extend credit or set rates and fees for consumers; rather, Visa
provides financial institutions with Visa-branded payment products that they then use to offer
credit, debit, prepaid and cash-access programs to their customers. In 2008, according to The
Nilson Report, Visa held a 38.3% market share of the credit card marketplace and 60.7% of the
debit card marketplace in the United States.[4] In 2009, Visa¶s global network (known as
VisaNet) processed 62 billion transactions with a total volume of $4.4 trillion.[5][6]

Visa has operations across Asia-Pacific, North America, Central and South America, Caribbean,
Central and Eastern Europe, Africa and Middle East. Visa Europe is a separate membership
entity that is an exclusive licensee of Visa Inc.'s trademarks and technology in the European
region, issuing cards such as Visa Debit.

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Gōngháng) is the largest Bank of China's 'Big Four' state-owned commercial banks (the
other three being the Bank of China, Agricultural Bank of China, and China Construction Bank).
It was founded as a limited company on January 1, 1984. As of 2009, it had assets of RMB 11
trillion (US$1.6 trillion), with over 18,000 outlets including 106 overseas branches and agents
globally.[4]

  
 
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´abushiki Gaisha Enu Ti Ti okomo, TYO: 9437, NYSE: DCM, LSE: NDCM) is the
predominant mobile phone operator in Japan. The name is officially an abbreviation of the
phrase, "j
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j  ë , meaning "everywhere" in Japanese. Docomo provides phone, video phone (FOMA and
Some PHS), i-mode (internet), and mail (i-mode mail, Short Mail, and SMS) services. The
company has its headquarters in the Sanno Park Tower, Nagatachō, Chiyoda, Tokyo.[2]

Docomo was spun off from Nippon Telegraph and Telephone (NTT) in August 1991 to take over
the mobile cellular operations. It provides 2G (mova) PDC cellular services on the 800 MHz
band, and 3G FOMA W-CDMA services on the 2 GHz (UMTS2100) and 800
MHz(UMTS800(Band VI)) and 1700 MHz(UMTS1700(Band IX)) bands. Its businesses also
included PHS (Paldio), paging, and satellite. Docomo ceased offering a PHS service on January
7, 2008.

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There are two parts that comprise an APO: the reverse merger and the PIPE. In the reverse
merger, the private company becomes public by merging with or being acquired by a public
³shell´ company. The shell company is a public company that has no assets or liabilities. When
the private company and public shell merge together, the combined entity thereafter trades under
the previously private company¶s name rather than the shell company¶s name as it did before.

What differentiates an APO from a reverse merger is the simultaneous PIPE raise. A PIPE is
when a publicly traded company sells its stock to investors in a privately negotiated transaction.
The stock is normally sold at a discount to current market value and investors are normally
acquiring unregistered ³restricted´ stock. The typical PIPE investor is an institutional investor
such as a hedge fund or mutual fund. PIPEs are usually completed by investment banks who act
as ³Placement Agent´ in the transaction.

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An APO is a quick transaction compared to an initial public offering (IPO). At the closing of an
APO, the public shell and private company sign merger documents to complete the reverse
merger; file a Super 8K with the Securities and Exchange Commission (SEC), which is the
required public disclosure of transaction; file a registration statement with the SEC to register the
PIPE shares; release PIPE funds from escrow; and issue a press release announcing the
completion of the transaction. The company¶s stock now begins trading on the OTCBB,
reflecting the new valuation.

A company can close an APO in as little as 30 ± 45 days. After the close of an APO, the
company is funded and has exactly the same SEC disclosure requirements as an IPO.
Approximately 3 to 4 months after the completion of the APO, the company¶s registration
statement should clear comments and ³go effective´ with the SEC. When this is accomplished
the company can then submit its application to obtain a listing on NASDAQ, AMEX, or NYSE.
Listing approval for the exchanges typically takes about one month. At this point analyst
research coverage begins and the company focuses on IR efforts, non-deal roadshow,
conferences etc.

At the conclusion of a successful APO transaction, a company has received equity funding and
has a base of institutional investors. The company has the sponsorship of an investment bank and
is exchange listed with analyst coverage. There is now a true market value for the company and
the company is positioned to raise additional capital in PIPE transactions.

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Companies want to become public through an APO for several reasons. The public shell
company already has shareholders, so after the APO is complete, the formerly private company
typically already meets the shareholder requirements for NASDAQ and AMEX; 400 and 300
respectively. A company that goes public through an IPO must sell its stock to a large number of
shareholders in order to meet these requirements necessitating a broad marketing and roadshow
process. Unlike an IPO, there is no public disclosure required until the transaction closes.
Customers, suppliers, employees, and press are unaware until closing. Therefore, a private
company can pursue going public through an APO and understand what kind of investor
response and valuation they will receive without having to make the ³leap of faith´ requirement
of an IPO. With an IPO a company must publicly announce its intentions and file with the SEC
at the beginning of the process. It is only after clearing comments with the SEC and after going
on the roadshow that a company learns what kind of investor response and valuation it will
receive.

The APO model owes much of its success to the involvement of the Investment Bank as the
gatekeeper that standalone reverse mergers never had. In a traditional reverse merger, anyone
could simply buy a shell and go public whether or not they had sufficient financial performance
to justify being a public company. With an APO, the investment bank would not raise capital for
a company that it did not believe would be successful in the marketplace. This is why the APO
has such a high success rate. The investment bank also brings research, trading and liquidity to
the company¶s stock after the transaction closes. Investment banks find the APO process
appealing because they can receive the same fees and breakage for raising the capital as they do
in an IPO in a much condensed period of time and to a significantly smaller number of investors.

PIPE investors are attracted to the APO because they get to buy stock at a negotiated discount to
the projected public market value of a company. In addition, because the company completed a
reverse merger and is now public, there is a guaranteed exit defined upfront if they wish to get
out. After a company completes an APO, potential investors will be inclined to invest in
additional PIPE raises for the company because the public company has had SEC disclosures
from day one including audited financial statements, Sarbanes-Oxley, 10Qs, 8Ks, etc. Many tier
1 hedge funds are active investors in APO and many investment banks support the process.
There are many tier 2 and tier 3 banks that are active in APO business.

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Investors expect a discount on stock since they are buying restricted securities and thus this is a
more expensive cost of capital to the company. The aftermarket of an APO typically takes 6 ± 12
months to develop and thus there is minimal stock liquidity immediately at closing.

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A company pursues a & # $!!" (DPO) to raise capital by marketing its shares
directly to its own customers, employees, suppliers, distributors and friends in the community.
DPOs are an alternative to underwritten public offerings by securities broker-dealer firms where
a company's shares are sold to the broker's customers and prospects.

Direct public offerings are considerably less expensive than traditional underwritten offerings.
Additionally, they don't have the restrictions that are usually associated with bank and venture
capital financing. On the other hand, a DPO will typically raise much less than a traditional
offering.

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Like an # $!!" (IPO), corporations seeking a DPO must be in full compliance
with the local securities branch of government. With that said, a DPO for all intents and purposes
is a publicly traded company with a symbol and is registered as a publicly traded company.
Individuals and corporations may purchase and sell its stock accordingly. Companies seeking a
DPO must provide:

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The corporation may sell securities once completing a DPO by direct methods; telemarketing or
mailouts but may also develop a brokering system to assist in the day to day management of such
securities.

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* ,4$ (ECO or a partial spin-off) is a sort of corporate reorganization, in which a

company creates a new subsidiary and IPOs it later, while retaining control.[1] [2] Usually, up to
20% of subsidiary shares is offered to the public. The transaction creates two separate legal
entities²parent company and daughter company²with their own boards, management teams,
financials, and CEOs. Equity carve-outs increase the access to capital markets, enabling carved-
out subsidiary strong growth opportunities, while avoiding the negative signaling associated with
a seasoned offering (SEO) of the parent equity.

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A # $!!".1$%"2 often called a r& or a r2 is a form of public

equity offering by non-Japanese firms in the Japanese market, without the previously required
simultaneous listing on a local exchange (e.g. TSE).

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Prior to 1989, non-Japanese firms that wanted to sell equity into the Japanese market via public
offering were required to list on a local Japanese stock exchange.[1] Changes in regulations[citation
needed]
introduced in 1989 allowed this form of public offering by foreign companies published,
audited financial statements and with stock that is (or will be) listed on a foreign stock exchange
which satisfies the requirements of the FSA.

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Equity offerings via POWL have been a common part of Asia regional public offerings since the
early 1990s, with Japanese investors often taking more than 20% of the offering through this
format.[2] ICBC and Bank of China (Hong Kong) used this format to allow their domestic public
offerings to spread into Japan.[3]

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or ,%" (reverse IPO) is the acquisition of a public company by a private company so

that the private company can bypass the lengthy and complex process of going public. The
transaction typically requires reorganization of capitalization of the acquiring company.

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In a reverse takeover, shareholders of the private company purchase control of the public shell
company and then merge it with the private company. The publicly traded corporation is called a
"shell" since all that exists of the original company is its organizational structure. The private
company shareholders receive a substantial majority of the shares of the public company and
control of its board of directors. The transaction can be accomplished within weeks. If the shell is
an SEC-registered company, the private company does not go through an expensive and time-
consuming review with state and federal regulators because this process was completed
beforehand with the public company.

The transaction involves the private and shell company exchanging information on each other,
negotiating the merger terms, and signing a share exchange agreement. At the closing, the shell
company issues a substantial majority of its shares and board control to the shareholders of the
private company. The private company's shareholders pay for the shell company by contributing
their shares in the private company to the shell company that they now control. This share
exchange and change of control completes the reverse takeover, transforming the formerly
privately held company into a publicly held company.

5&3 !%
The advantages of public trading status include the possibility of commanding a higher price for
a later offering of the company's securities. Going public through a reverse takeover allows a
privately held company to become publicly held at a lesser cost, and with less stock dilution than
through an initial public offering (IPO). While the process of going public and raising capital is
combined in an IPO, in a reverse takeover, these two functions are separate. A company can go
public without raising additional capital. Separating these two functions greatly simplifies the
process.
In addition, a reverse takeover is less susceptible to market conditions. Conventional IPOs are
risky for companies to undertake because the deal relies on market conditions, over which senior
management has little control. If the market is off, the underwriter may pull the offering. The
market also does not need to plunge wholesale. If a company in registration participates in an
industry that's making unfavorable headlines, investors may shy away from the deal. In a reverse
takeover, since the deal rests solely between those controlling the public and private companies,
market conditions have little bearing on the situation.

The process for a conventional IPO can last for a year or more. When a company transitions
from an entrepreneurial venture to a public company fit for outside ownership, how time is spent
by strategic managers can be beneficial or detrimental. Time spent in meetings and drafting
sessions related to an IPO can have a disastrous effect on the growth upon which the offering is
predicated, and may even nullify it. In addition, during the many months it takes to put an IPO
together, market conditions can deteriorate, making the completion of an IPO unfavorable. By
contrast, a reverse takeover can be completed in as little as thirty days.

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Reverse takeovers always come with some history and some shareholders. Sometimes this
history can be bad and manifest itself in the form of currently sloppy records, pending lawsuits
and other unforeseen liabilities. Additionally, these shells may sometimes come with angry or
deceitful shareholders who are anxious to "dump" their stock at the first chance they get.

One way the acquiring or surviving company can safeguard against the "dump" after the
takeover is consummated, is by requiring a lockup on the shares owned by the group they are
purchasing the public shell from. Other shareholders that have held stock as investors in the
company being acquired pose no threat in a dump scenario because the number of shares they
hold is not significant and, unfortunately for them, they are likely to have the number of shares
they own reduced by a reverse stock split that is not an uncommon part of a reverse takeover.

Possibly the biggest caveat is that most CEO's are naive and inexperienced in the world of
publicly traded companies unless they have past experience as an officer or director of a public
company.

A major disadvantage of going public via a reverse merger is that such transactions only
introduce liquidity to a previously private stock if there is bona fide public interest in the
company.

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The greater number of financing options available to publicly held companies is a primary reason
to undergo a reverse takeover. These financing options include:
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$46 is an SEC filing used by public companies to register their securities with the U.S.
Securities and Exchange Commission (SEC) as the "registration statement under the Securities
Act of 1933". The S-1 contains the basic business and financial information on an issuer with
respect to a specific securities offering. Investors may use the prospectus to consider the merits
of an offering and make educated investment decisions. A prospectus is one of the main
documents used by an investor to research a company prior to an initial public offering (IPO).
Other less detailed registration forms, such as Form S-3 may be used for certain registrations.

Every business day from 10 to 50 S-1 forms are filed with the SEC's EDGAR filing system, the
required filing format of the U.S. Securities and Exchange Commission. However many of these
(typically 30% to 90%) are of the related Form S-1/A, which is used for filing amendments to a
previously filed Form S-1.

The S-1 form has an OMB Approval Number of 3234-0065 and the online form is only 8 pages.
However the simplicity of the form's design is belied by the OMB Office's figure of the
Estimated Average Burden - 849.2 hours. This means that long time and effort has been used to
collect and display information about the filer (a corporate registrant or new registrant who
intends to offer securities). The S-1 form requires that the registrant provide information from
diverse sources and incorporate this information using many rules or regulations, such as General
Rules and Regulations under the Securities Act, Regulation C, Regulation S-K and Regulation S-
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Template:Find Venture Capital Funds

 # () is financial capital provided to early-stage, high-potential, growth startup
companies. The venture capital fund makes money by owning equity in the companies it invests
in, which usually have a novel technology or business model in high technology industries, such
as biotechnology, IT, software, etc. The typical venture capital investment occurs after the seed
funding round as growth funding round (also referred as Series A round) in the interest of
generating a return through an eventual realization event, such as an IPO or trade sale of the
company.

In addition to angel investing and other seed funding options, venture capital is attractive for new
companies with limited operating history that are too small to raise capital in the public markets
and have not reached the point where they are able to secure a bank loan or complete a debt
offering. In exchange for the high risk that venture capitalists assume by investing in smaller and
less mature companies, venture capitalists usually get significant control over company
decisions, in addition to a significant portion of the company's ownership (and consequently
value).

Venture capital is also associated with job creation (accounting for 21% of US GDP),[1] the
knowledge economy, and used as a proxy measure of innovation within an economic sector or
geography. Every year there are nearly 2 million business created in the USA, and only 600-800
get venture capital funding.

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With few exceptions, private equity in the first half of the 20th century was the domain of
wealthy individuals and families. The Vanderbilts, Whitneys, Rockefellers, and Warburgs were
notable investors in private companies in the first half of the century. In 1938, Laurance S.
Rockefeller helped finance the creation of both Eastern Air Lines and Douglas Aircraft and the
Rockefeller family had vast holdings in a variety of companies. Eric M. Warburg founded E.M.
Warburg & Co. in 1938, which would ultimately become Warburg Pincus, with investments in
both leveraged buyouts and venture capital.

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Before World War II, money orders (originally known as "development capital") were primarily
the domain of wealthy individuals and families. It was not until after World War II that what is
considered today to be true private equity investments began to emerge marked by the founding
of the first two venture capital firms in 1946: American Research and Development Corporation.
(ARDC) and J.H. Whitney & Company.[2]

ARDC was founded by Georges Doriot, the "father of venture capitalism"[3] (former dean of
Harvard Business School and founder of INSEAD), with Ralph Flanders and Karl Compton
(former president of MIT), to encourage private sector investments in businesses run by soldiers
who were returning from World War II. ARDC's significance was primarily that it was the first
institutional private equity investment firm that raised capital from sources other than wealthy
families although it had several notable investment successes as well.[4] ARDC is credited with
the first trick when its 1957 investment of $70,000 in Digital Equipment Corporation (DEC)
would be valued at over $355 million after the company's initial public offering in 1968
(representing a return of over 1200 times on its investment and an annualized rate of return of
101%).[5] Former employees of ARDC went on and established several prominent venture capital
firms including Greylock Partners (founded in 1965 by Charlie Waite and Bill Elfers) and
Morgan, Holland Ventures, the predecessor of Flagship Ventures (founded in 1982 by James
Morgan).[6] ARDC continued investing until 1971 with the retirement of Doriot. In 1972, Doriot
merged ARDC with Textron after having invested in over 150 companies.

J.H. Whitney & Company was founded by John Hay Whitney and his partner Benno Schmidt.
Whitney had been investing since the 1930s, founding Pioneer Pictures in 1933 and acquiring a
15% interest in Technicolor Corporation with his cousin Cornelius Vanderbilt Whitney. By far
Whitney's most famous investment was in Florida Foods Corporation. The company developed
an innovative method for delivering nutrition to American soldiers, which later came to be
known as Minute Maid orange juice and was sold to The Coca-Cola Company in 1960. J.H.
Whitney & Company continues to make investments in leveraged buyout transactions and raised
$750 million for its sixth institutional private equity fund in 2005.
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One of the first steps toward a professionally-managed venture capital industry was the passage
of the Small Business Investment Act of 1958. The 1958 Act officially allowed the U.S. Small
Business Administration (SBA) to license private "Small Business Investment Companies"
(SBICs) to help the financing and management of the small entrepreneurial businesses in the
United States.[7]

During the 1960s and 1970s, venture capital firms focused their investment activity primarily on
starting and expanding companies. More often than not, these companies were exploiting
breakthroughs in electronic, medical, or data-processing technology. As a result, venture capital
came to be almost synonymous with technology finance.

An early West Coast venture capital company was Draper and Johnson Investment Company,
formed in 1962[8] by William Henry Draper III and Franklin P. Johnson, Jr. In 1964 Bill Draper
and Paul Wythes founded Sutter Hill Ventures, and Pitch Johnson formed Asset Management
Company.

It is commonly noted that the first venture-backed startup is Fairchild Semiconductor (which
produced the first commercially practical integrated circuit), funded in 1959 by what would later
become Venrock Associates.[9] Venrock was founded in 1969 by Laurance S. Rockefeller, the
fourth of John D. Rockefeller's six children as a way to allow other Rockefeller children to
develop exposure to venture capital investments.

It was also in the 1960s that the common form of private equity fund, still in use today, emerged.
Private equity firms organized limited partnerships to hold investments in which the investment
professionals served as general partner and the investors, who were passive limited partners, put
up the capital. The compensation structure, still in use today, also emerged with limited partners
paying an annual management fee of 1-2.5% and a carried interest typically representing up to
20% of the profits of the partnership.

The growth of the venture capital industry was fueled by the emergence of the independent
investment firms on Sand Hill Road, beginning with Kleiner, Perkins, Caufield & Byers and
Sequoia Capital in 1972. Located, in Menlo Park, CA, Kleiner Perkins, Sequoia and later venture
capital firms would have acc were many semiconductor companies based in the Santa Clara
Valley as well as early computer firms using their devices and programming and service
companies.[10] Throughout the 1970s, a group of private equity firms, focused primarily on
venture capital investments, would be founded that would become the model for later leveraged
buyout and venture capital investment firms. In 1973, with the number of new venture capital
firms increasing, leading venture capitalists formed the National Venture Capital Association
(NVCA). The NVCA was to serve as the industry trade group for the venture capital industry.[11]
Venture capital firms suffered a temporary downturn in 1974, when the stock market crashed and
investors were naturally wary of this new kind of investment fund.

It was not until 1978 that venture capital experienced its first major fundraising year, as the
industry raised approximately $750 million. With the passage of the Employee Retirement
Income Security Act (ERISA) in 1974, corporate pension funds were prohibited from holding
certain risky investments including many investments in privately held companies. In 1978, the
US Labor Department relaxed certain of the ERISA restrictions, under the "prudent man rule,"[12]
thus allowing corporate pension funds to invest in the asset class and providing a major source of
capital available to venture capitalists.de

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Venture capitalists are typically very selective in deciding what to invest in; as a rule of thumb, a
fund may invest in one in four hundred opportunities presented to it. Funds are most interested in
ventures with exceptionally high growth potential, as only such opportunities are likely capable
of providing the financial returns and successful exit event within the required timeframe
(typically 3±7 years) that venture capitalists expect.

Young companies wishing to raise venture capital require a combination of extremely rare, yet
sought after, qualities, such as innovative technology, potential for rapid growth, a well-
developed business model, and an impressive management team. VCs typically reject 98% of
opportunities presented to them[citation needed], reflecting the rarity of this combination.

Because investments are illiquid and require 3±7 years to harvest, venture capitalists are
expected to carry out detailed due diligence prior to investment. Venture capitalists also are
expected to nurture the companies in which they invest, in order to increase the likelihood of
reaching an IPO stage when valuations are favourable. Venture capitalists typically assist at four
stages in the company's development:[19]

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Because there are no public exchanges listing their securities, private companies meet venture
capital firms and other private equity investors in several ways, including warm referrals from
the investors' trusted sources and other business contacts; investor conferences and symposia;
and summits where companies pitch directly to investor groups in face-to-face meetings,
including a variant known as "Speed Venturing", which is akin to speed-dating for capital, where
the investor decides within 10 minutes whether s/he wants a follow-up meeting. In addition there
are some new private online networks that are emerging to provide additional opportunities to
meet investors.[20]

This need for high returns makes venture funding an expensive capital source for companies, and
most suitable for businesses having large up-front capital requirements which cannot be financed
by cheaper alternatives such as debt. That is most commonly the case for intangible assets such
as software, and other intellectual property, whose value is unproven. In turn this explains why
venture capital is most prevalent in the fast-growing technology and life sciences or
biotechnology fields.

If a company does have the qualities venture capitalists seek including a solid business plan, a
good management team, investment and passion from the founders, a good potential to exit the
investment before the end of their funding cycle, and target minimum returns in excess of 40%
per year, it will find it easier to raise venture capital.

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There are typically six stages of financing offered in Venture Capital, that roughly correspond to
these stages of a company's development.[21]

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Between the first round and the fourth round, venture backed companies may also seek to take
"venture debt".[22]

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A venture capitalist (also known as a VC) is a person or investment firm that makes venture
investments, and these venture capitalists are expected to bring managerial and technical
expertise as well as capital to their investments. A , #!& refers to a pooled
investment vehicle (often an LP or LLC) that primarily invests the financial capital of third-party
investors in enterprises that are too risky for the standard capital markets or bank loans. Venture
capital firms typically comprise small teams with technology backgrounds (scientists,
researchers) or those with business training or deep industry experience.

A core skill within VC is the ability to identify novel technologies that have the potential to
generate high commercial returns at an early stage. By definition, VCs also take a role in
managing entrepreneurial companies at an early stage, thus adding skills as well as capital
(thereby differentiating VC from buy-out private equity, which typically invest in companies
with proven revenue), and thereby potentially realizing much higher rates of returns. Inherent in
realizing abnormally high rates of returns is the risk of losing all of one's investment in a given
startup company. As a consequence, most venture capital investments are done in a pool format,
where several investors combine their investments into one large fund that invests in many
different startup companies. By investing in the pool format, the investors are spreading out their
risk to many different investments versus taking the chance of putting all of their money in one
start up firm.

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Venture capital firms are typically structured as partnerships, the general partners of which serve
as the managers of the firm and will serve as investment advisors to the venture capital funds
raised. Venture capital firms in the United States may also be structured as limited liability
companies, in which case the firm's managers are known as managing members. Investors in
venture capital funds are known as limited partners. This constituency comprises both high net
worth individuals and institutions with large amounts of available capital, such as state and
private pension funds, university financial endowments, foundations, insurance companies, and
pooled investment vehicles, called fund of fund.

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Depending on your business type, the venture capital firm you approach will differ.[23] For
instance, if you're a startup internet company, funding requests from a more manufacturing-
focused firm will not be effective. Doing some initial research on which firms to approach will
save time and effort. When approaching a VC firm, consider their portfolio:

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Targeting specific types of firms will yield the best results when seeking VC financing.
Wikipedia has a list of venture capital firms that can help you in your initial exploration. The
National Venture Capital Association segments dozens of VC firms into ways that might assist
you in your search.[24] It is important to note that many VC firms have diverse portfolios with a
range of clients. If this is the case, finding gaps in their portfolio is one strategy that might
succeed.

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Within the venture capital industry, the general partners and other investment professionals of
the venture capital firm are often referred to as "venture capitalists" or "VCs". Typical career
backgrounds vary, but broadly speaking venture capitalists come from either an operational or a
finance background. Venture capitalists with an operational background tend to be former
founders or executives of companies similar to those which the partnership finances or will have
served as management consultants. Venture capitalists with finance backgrounds tend to have
investment banking or other corporate finance experience.

Although the titles are not entirely uniform from firm to firm, other positions at venture capital
firms include:
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Most venture capital funds have a fixed life of 10 years, with the possibility of a few years of
extensions to allow for private companies still seeking liquidity. The investing cycle for most
funds is generally three to five years, after which the focus is managing and making follow-on
investments in an existing portfolio. This model was pioneered by successful funds in Silicon
Valley through the 1980s to invest in technological trends broadly but only during their period of
ascendance, and to cut exposure to management and marketing risks of any individual firm or its
product.

In such a fund, the investors have a fixed commitment to the fund that is initially unfunded and
subsequently "called down" by the venture capital fund over time as the fund makes its
investments. There are substantial penalties for a Limited Partner (or investor) that fails to
participate in a capital call.

It can take anywhere from a month or so to several years for venture capitalists to raise money
from limited partners for their fund. At the time when all of the money has been raised, the fund
is said to be closed and the 10 year lifetime begins. Some funds have partial closes when one half
(or some other amount) of the fund has been raised. "Vintage year" generally refers to the year in
which the fund was closed and may serve as a means to stratify VC funds for comparison. This
free database of venture capital funds shows the difference between a venture capital fund
management company and the venture capital funds managed by them.