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To: fiberman who wrote (11518)	3/17/1999 3:04:00 AM
From: ratan lal	Read Replies (1) \| Respond to of 27722

NAVR G^$@&$@*) F_$)_($_)G ^^^*POS

To: fiberman who wrote (11518)	3/17/1999 3:19:00 AM
From: BANCHEE	Read Replies (4) \| Respond to of 27722

fiberman and all something to read and help understand what is going on....March 21 out of town.... maybe----road show??? Second in a four-part series The ABCs of IPOs: Know the Process Part One: Speak the language Part Three: A look at the prospectus Part Four: Play the game In the sometimes mundane world of investing, initial public offerings hold an alluring mystique. The world of newly public companies, after all, remains off-limits for most individual investors. That might start to change as soon as 1998. Apart from the sex appeal and the potential for big returns, however, investing in IPOs is risky business. One simple fact anybody interested in jumping in the new-issue market should know is that IPOs have historically underperformed the broader market. In 1997, for example, IPOs gained about 14.3% from the offering price versus a 31% gain for the Standard & Poor's 500 Index. And if you use an IPO's first trade price as the benchmark -- fuhgedaboutit. IPOs in 1997 rose only 8.9% above their opening prices. Obviously, investors need to go beyond the allure and hype of IPOs and become educated about the facts. To help toward that end, CBS MarketWatch is publishing a special four-part series on the IPO market entitled "The ABCs of IPOs," featured here at IPO Central. Last week we defined some common terms used in the IPO market. This week we look at the IPO process from beginning to end. Next week we'll take a close look at the all-important prospectus and then we'll close the series with some possible IPO investment strategies. All Hands A company that is thinking about going public should start acting like a public company as much as two years in advance of the desired IPO. Several steps recommended by experts include preparing detailed financial results on a regular basis and developing a business plan. Once a company decides to go public, it needs to pick its IPO team, consisting of the lead investment bank, an accountant and a law firm. The IPO process officially begins with what is typically called an "all-hands" meeting. At this meeting, which usually takes place six to eight weeks before a company officially registers with the Securities & Exchange Commission, all the members of the IPO team plan a timetable for going public and assign certain duties to each member. Selling the Deal The most important and time-consuming task facing the IPO team is the development of the prospectus, a business document that basically serves as a brochure for the company. Since the SEC imposes a "quiet period" on companies once they file for an IPO until 25 days after a stock starts trading, the prospectus will have to do most of the talking and selling for the management team. The prospectus includes all financial data for a company for the past five years, information on the management team, and a description of a company's target market, competitors and growth strategy. There's a lot of other important information in the prospectus, and the underwriting team goes to great lengths to make sure it's all accurate, but we'll take a closer look at the prospectus next week. Once the preliminary prospectus is printed and filed with the SEC, the company has to wait as the SEC, the NASD and other relevant state securities organizations review the document for any omissions or problems. If the agencies find any problems with the prospectus, the company and the underwriting team will have to make fixes with amended filings. In the meantime, the lead underwriter must assemble a syndicate of other investment banks that will help sell the deal. Each bank in the syndicate will get a certain amount of shares in the IPO to sell. The syndicate then gather so-called indications of interest from clients to see what kind of initial demand there is for the deal. Syndicates usually include investment banks that have complementary clientele. On the Road The next step in the IPO process is the grueling, whirlwind multicity world tour, also known as the road show. The road show usually lasts a week, with company management going to a new city every day to meet with prospective investors and show off their business plan. The typical US stops on the road show include New York, San Francisco, Boston, Chicago and Los Angeles. If appropriate, international destinations like London or Hong Kong may also be included. How a company's management team performs on the road show is perhaps the most crucial factor in determining the success of the IPO. Companies need to impress institutional investors so that at least a few of them are willing to commit to significant long-term investments. The road show is also the most blatant example of how unfair the IPO market can be for the average investor. Only institutional investors and big money men are invited to attend the road show meetings, where statements regarding a company's business prospects -- discussed only minimally in a prospectus -- are talked about quite openly. Such disclosures, according to the SEC, are legal, as long as done orally. Once the road show ends and the final prospectus is printed and distributed to investors, company management meets with their investment bank to choose the final offering price and size. Investment banks usually suggest an appropriate price based on expected demand for the deal and other market conditions. The pricing of an IPO is a delicate balancing act. Investment firms have to worry about two different sets of clients -- the company going public, which wants to raise as much money as possible, and the investors buying the shares, who expect to see some immediate appreciation in their investment. According to Ken Fitzsimmons, director of capital markets at BancAmerica Robertson Stephens, investment banks usually try to price a deal so that the opening premium is about 15 percent. If interest in an IPO appears to be flagging, it's common for the number of shares in the offering or their price to be cut from the expected ranges included in a company's earlier registration statements. Somewhat rarer is when a company postpones an offering due to insufficient demand. If a deal is especially hot, the offering price or size can also be raised from initial expectations. Let the Games Begin Once the offering price has been agreed to -- and at least two days after potential investors receive the final prospectus -- an IPO is declared effective. This is usually done after a market closes, with trading in the new stock starting the next day as the lead underwriter works to firm up its book of buy orders. The lead underwriter is primarily responsible for ensuring smooth trading in a company's stock during those first few crucial days. The underwriter is legally allowed to support the price of a newly issued stock by buying shares in the market or selling them short (meaning shares it doesn't have in its account). It can also impose penalty bids on brokers to discourage flipping, which is when investors sell shares in an IPO soon after the stock starts trading. This ability to somewhat control the price of an IPO is one reason why investors feel it's such a negative when a stock quickly falls below its offering price. An IPO is not declared final until about seven days after the company's market debut. On rare occasions, an IPO can be canceled even after a stock starts trading. In such cases -- the latest example being the 1997 deal from cargo shipper Fine Air Services -- all trading is negated and any money collected from investors is returned. Part One: Speak the language Part Three: A look at the prospectus Part Four: Play the game