HOW IPOs WORK

The IPO market is on fire! Before doing Venture Capital I took “microcap” companies public. The last company I took public was Fuling, ticker: FORK. They did $90M in revenue and $15M in EBITDA. We raised money from investors, and instead of doing a private round we did an IPO. We did this over and over. I realized a lot of people don’t know how IPOs work, so I wanted to break it down. The money is raised before the IPO ideally, and people who buy at the IPO get cut back or buy at higher prices.

The 2012 Jumpstart Our Business Startups Act (JOBS Act) could be one reason for so many IPOs.The government enacted the JOBS Act to encourage small business and startup funding by easing regulations and allowing a larger base of individuals to become investors. The JOBS Act also made initial public offerings (IPOs) easier for smaller companies, in part by allowing early correspondence between companies and the SEC to be done in private (filing confidentially) avoiding public scrutiny by the media and competitors. The SEC changed that rule to allow all companies, not just small businesses, to file early regulatory documents confidentially. The plan was to encourage later-stage companies to file for public offerings, and it may well be working. If you have investors and want to go public, you can hire bankers and list on NASDAQ. If you buy public stocks, here is how IPOs are done. Keep building!

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