I remember vividly the first initial public offering I worked on as a young and eager investment banker in 1994. I had joined what was then the largest investment bank in London as a graduate trainee with the 1991 intake. I spent the early years of my career writing briefing notes and working in the debt capital markets department, executing long-dated mortgage debentures and sterling-denominated bond issues for property developers, co-operative societies and brewers in the north of England. I longed for transactions that had a more international flavour and had just transferred to the equity capital markets (ECM) team,...

Going public—offering shares for the first time to third-party investors—is probably one of the most important decisions that can be made during the life of a company. For shareholders of family-owned businesses, it can provide a welcome source of liquidity for their holdings. But it also opens up their affairs to the scrutiny of outsiders. Through a flotation, entrepreneurial ventures can find an unparallelled source of capital to support their development. Investors buy initial public offerings (IPOs) because they offer them the opportunity to build a sizeable position in a stock, something that would in most cases be...

In addition to investment banks, a number of other parties must be appointed to execute an IPO. For all such third-party advisers, several fixed quotes to pay for their services will usually be obtained before appointments are made. It is now rare to pay legal or other advisers by the hour for an IPO, except perhaps for very small transactions.

Most important are the legal advisers. There are generally “two sides” of legal firms in a primary equity transaction. Broadly speaking, one firm, or one set of firms, advises the issuer and another, the underwriters.

The legal firm advising the...

All the major investment banks have active and sizeable sell-side research departments. These research departments support their sales and trading efforts in the secondary market across a variety of securities. In many countries, research is also important to assist in the marketing of IPOs to investors.

On a macro level, banks have economists that advise their institutional investor clients on major market events, as well as strategists who make recommendations on asset allocation, based on trends and high-level market developments. Investment banks also often have research analysts covering currencies, commodities, fixed income and equity securities. On the equities side, in...

In every IPO and primary equity offering there is the possibility of immediate instability in the aftermarket, when the stock is traded between short-term buyers and sellers. This may, on occasion, affect the share price, which may temporarily fall below the offer price. It is therefore common for the issuer to appoint, generally from within the global coordinators and bookrunners, a stabilizing agent (also sometimes called a stabilizing manager) to go into the market and buy (or offer to buy) the securities to stabilize or maintain their price during the initial period after listing.

There can only be one stabilizing...