The ABCs of IPOs
Financing, or underwriting as it is sometimes called, is the process by which a company or government raises capital either publicly or privately. For corporations, this can be accomplished by an Initial Public Offering or IPO.
An IPO is created when a company requires financing that simply cannot be arranged privately. The IPO demands a great deal of finesse by the underwriter, since the company seeking financing is relying on the expertise and advice of the investment dealer in providing funding. How the issue is handled can affect the financial well-being of the company for years to come. It is important that the investment dealer be competent, imaginative, thorough and diligent in the preparation of the official financing documents as well as in the marketing of the issue.
Securities acts regulate the manner in which securities may be sold, and, among other things, require that whenever a new issue of securities is to be offered to the public in the province, a prospectus must be prepared in accordance with the requirements of the particular provincial act. It must also be accepted for filing by the provincial securities commission.
The basic principle governing prospectus requirements is that "full, true and plain disclosure of all material facts relating to the securities offered" must be made in the prospectus. In no way does the prospectus imply that any government body has approved the issue as constituting a suitable or an attractive investment; the prospectus is designed only to enable the prospective investor to make an intelligent decision.
It's important that you request a copy of the preliminary prospectus for an IPO and read it carefully prior to making any investment decisions.
The information contained herein is considered accurate at the time of posting. CIBC, CIBC World Markets Inc. and CIBC Investor Services Inc. reserve the right to change any of it without prior notice. It is for general information purposes only. Clients are advised to seek advice regarding their particular circumstances from their personal tax advisors.
CIBC Investor's Edge is the discount brokerage division of CIBC Investor Services Inc., member of the Canadian Investor Protection Fund. CIBC Investor Services Inc. does not provide you with any legal, tax, or accounting advice or advice regarding the suitability or profitability of a security or investment in a CIBC Investor's Edge account. You assume full responsibility for transactions in your CIBC Investor's Edge account and for your investment decisions.
The information on this Web site is general only; it is not intended as specific investment, financial, accounting, legal or tax advice for any individual, and you should not rely on it as such.
Copyright® 2008 Canadian Imperial Bank of Commerce. All rights reserved.