Old vs. New: IPO – Initial Public Offering

The Old Way – an Overview

Traditionally, an IPO (Initial Public Offering) is a process undertaken by an established company to sell a portion of itself, for the first time, to the public.

It’s often called “going public.” A company that did this “went public.”

The process uses investment banks like Morgan Stanley and Goldman Sachs, costs many million of dollars, and is a great way for companies to raise money for the company and provide liquidity for investors.  Facebook and Google are two examples of tech companies that went public in the traditional way.

Usually, shares in these companies are only offered to preferred customers of the investment banks.  Very little or no opportunity for the everyday person to get in on these opportunities.

The New Way – an Overview

Under Title IV / Tier 2 of the JOBS Act, companies that want to sell shares directly to the public for the first time bypass the traditional process because they are exempted from certain regulations.  This exemption makes it much more affordable to sell shares to the public.  The new way is sometime called “IPO Lite” or “Mini IPO”.  Another goal of the JOBS Act was to make it more likely, and easier, for everyday persons to participate.

Because it is more affordable, and because more people can participate, it is likely that less-established companies, even startups like iConsumer, can “go public” to raise the money they need to grow their businesses.

The Old Way in Detail