2008-01-04

IPOs - Speak The Basics (Very Good Reading) (5)

Offering price -

The price that investors must pay for allocated shares in an IPO.

Not the same as the opening price, which is the first trade price of a new stock.

Opening price -

The price at which a new stock starts trading.

Also called the first trade price.

Underwriters hope that the opening price is above the offering price, giving investors in the IPO a premium.

Oversubscribed -

Defines a deal in which investors apply for more shares than are available.

Usually a sign that an IPO is a hot deal and will open at a substantial premium.

Penalty bid -

A fee charged to brokers by the lead underwriter for having to take back shares already sold.

Meant to discourage flipping.

Pipeline -

A term used to describe the stage in the IPO process at which companies have registered with the SEC and are waiting to go public.

Premium -

The difference between the offering price and opening price.

Also called an IPO's pop.

Prospectus -

The document, included in a company's S-1 registration statement, which explains all aspects of a company's business, including financial results, growth strategy, and risk factors.

The preliminary prospectus is also called a red herring because of the red ink used on the front page, which indicates that some information ? such as the price and share amounts ? is subject to change.

Proxy - An authorization, in writing, by a shareholder for another person to represent him/her at a shareholders' meeting and exercise voting rights.

"By Darren Chervitz, CBS MarketWatch"

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