Initial Public Offering (IPO)

Process by which a company becomes listed on an exchange

A company usually prepares and executes an IPO with the support of an issuing bank, or, in the case of large-scale issues, in conjunction with a syndicate.

Companies go public primarily as a means of raising additional equity capital and as an exit channel for the original capital providers (e.g., venture capital companies). Additional benefits of an IPO include a higher profile for the issuing company and a broader investor base. It is more advantageous for a company to go public during a bull market because this increases the likelihood that all new shares will be purchased, thereby lowering the cost of capital for the issuer.

Admission to the exchange

Prerequisite for a listing on the stock exchange

At FWB® Frankfurter Wertpapierbörse (Frankfurt Stock Exchange) the Admissions Office is responsible for deciding whether to admit securities to the Official Market; the admission of securities to the Regulated Market is determined by the Admissions Committee. Each market segment has its own admissions requirements. However, all issuers must publish an offering prospectus containing the fundamental data required for an evaluation of the security.

Admission to General Standard does not require any further action on the issuers’ part. However, issuers have to apply for admission to Prime Standard; a listing in this segment is subject to the fulfillment of high international transparency requirements.

Issuing price

The initial price of a newly issued security determined off the exchange by the issuing company

In recent years, the bookbuilding method has become a widely used procedure for determining issuing prices.