what is the ipo process 
the ipo process essentially consists of two parts the first is the pre marketing phase of the offering while the second is the initial public offering itself when a company is interested in an ipo it will advertise to underwriters by soliciting private bids or it can also make a public statement to generate interest the underwriters lead the ipo process and are chosen by the company a company may choose one or several underwriters to manage different parts of the ipo process collaboratively the underwriters are involved in every aspect of the ipo due diligence document preparation filing marketing and issuance advantages and disadvantages of an ipothe primary objective of an ipo is to raise capital for a business it can also come with other advantages as well as disadvantages one of the key advantages is that the company gets access to investment from the entire investing public to raise capital this facilitates easier acquisition deals share conversions and increases the company s exposure prestige and public image which can help the company s sales and profits increased transparency that comes with required quarterly reporting can usually help a company receive more favorable credit borrowing terms than a private company companies may confront several disadvantages to going public and potentially choose alternative strategies some of the major disadvantages include the fact that ipos are expensive and the costs of maintaining a public company are ongoing and usually unrelated to the other costs of doing business fluctuations in a company s share price can be a distraction for management which may be compensated and evaluated based on stock performance rather than real financial results additionally the company becomes required to disclose financial accounting tax and other business information during these disclosures it may have to publicly reveal secrets and business methods that could help competitors rigid leadership and governance by the board of directors can make it more difficult to retain good managers willing to take risks remaining private is always an option instead of going public companies may also solicit bids for a buyout additionally there can be some alternatives that companies may explore can raise additional funds in the future through secondary offeringsattracts and retains better management and skilled employees through liquid stock equity participation e g esops ipos can give a company a lower cost of capital for both equity and debtsignificant legal accounting and marketing costs arise many of which are ongoingincreased time effort and attention required of management for reportingthere is a loss of control and stronger agency problemsipo alternativesa direct listing is when an ipo is conducted without any underwriters direct listings skip the underwriting process which means the issuer has more risk if the offering does not do well but issuers also may benefit from a higher share price a direct offering is usually only feasible for a company with a well known brand and an attractive business in a dutch auction an ipo price is not set potential buyers can bid for the shares they want and the price they are willing to pay the bidders who were willing to pay the highest price are then allocated the shares available investing in an ipo