# Transcript

The initial step for the company would normally be to appoint a lead bank or possibly a small number of co-leads in case the issuance is particularly large, to advise it through the listing process, and to manage the sale of shares to investors. The lead bank, or the co-leads, would usually be expected to underwrite the transaction, in effect, committing to buy those shares not subscribed by investors on the launch date.
Simultaneously, the company would appoint legal advisors to take charge of the documentation requirements. At this stage, other banks can be invited into the transactions to work under the lead or co-leads.
Next, the company must decide which stock exchanges to list the shares on. Among the key determinants of this choice will be the relative costs, where the company is domiciled, and, particularly in the case of a multinational company, where it conducts the largest volume of its business.
The second stage of the process involves the compilation of an issuing prospectus that must be reviewed by the relevant regulator. In the UK, this would be the Financial Conduct Authority, or FCA. And in the USA, this would be the Securities and Exchange Commission, or SEC. The information contained in the prospectus would include details of the company financial performance in the recent past, usually up to five years, and projections for future business performance.
Part of the process of producing the prospectus involves what's known as due diligence - where the company financial performance, current financial standing, and future plans are subject to review by the lead bank or co-leads underwriting the transaction. Particular focus is placed on the viability of the company business plan since the success of this will critically influence both the company's share price and the dividends in the years after the IPO.
Ahead of the launch, the company and the lead bank or co-leading banks would be likely to roadshow the issue, making presentations to groups of institutional investors such as pension funds and hedge funds. After assessing market sentiment, the lead bank and other members of the syndicate of banks can advise on the appropriate price to offer the shares. This is often a range rather than a specific price.
The underwriting bank can see how much interest there is from investors and where within the price range they're prepared to buy. The book of bids for the shares at prices within the range can then be built up. In doing this, the company will know where it should price to sell it shares. The exact price can then be set, and the issue launched.
This process of book building to determine the share price is a practise that's spread to other major financial markets from the US. This is perhaps not surprising, given that US investment banks dominate the international markets.