Editing 1course Stock Market (section)

== How IPOs Work ==

=== Step 1: Hire Underwriters ===
The company hires investment banks, known as underwriters, to manage the IPO process. These underwriters help determine the offering price, buy the initial shares from the company, and sell them to the public.

=== Example: Companies like Goldman Sachs and Morgan Stanley are prominent underwriters in the IPO market. ===

=== Step 2: File with the SEC ===
The company must file a registration statement, including a prospectus, with the Securities and Exchange Commission (SEC). This document provides detailed information about the company’s business, financials, and risks.

=== Example: The prospectus for an IPO like Airbnb’s would detail its revenue model, growth strategy, and potential risks to investors. ===

=== Step 3: Set the IPO Price ===
The underwriters and the company determine the IPO price based on factors like market demand, company valuation, and industry conditions.

=== Example: The IPO price of a company is set after gauging investor interest through a process called a roadshow, where company executives present their business to potential investors. ===

=== Step 4: Launch the IPO ===
On the IPO day, the company’s shares are listed on a stock exchange, and trading begins. The opening price can fluctuate based on market demand.

=== Example: When Twitter went public in 2013, its shares opened at $26 but quickly rose to $45, reflecting strong investor demand. ===