THE HISTORY OF THE STOCK MARKETS AND THE IPO

The history of stock markets dates back to the late 1700s, when the first organized stock exchange was established in Amsterdam. This exchange, known as the Amsterdam Stock Exchange, was created to facilitate the trading of shares in the Dutch East India Company, which had a monopoly on trade with Asia. The exchange provided a marketplace for investors to buy and sell shares in the company and allowed the company to raise capital by issuing shares to the public.

As the industrial revolution progressed, stock markets began to develop in other countries, including the United States. The New York Stock Exchange (NYSE) was established in 1792, and it quickly became the premier stock exchange in the United States. The NYSE was originally located on Wall Street in New York City, and it is still the largest stock exchange in the United States today.

The process of initial public offerings (IPOs) also has a long history. IPOs have been used as a way for companies to raise capital for centuries, but the modern IPO process as we know it today began to take shape in the United States in the early 20th century. The Securities Act of 1933 and the Securities Exchange Act of 1934 set regulations for the issuance and sale of securities and established the Securities and Exchange Commission (SEC) to oversee the securities markets. These laws and regulations paved the way for the modern IPO process, which involves companies preparing and filing a registration statement with the SEC and going through a review process before issuing shares to the public.

EQUITY CAPITAL MARKETS AND THE MODERN IPO

Equity capital markets (ECM) refer to the markets where companies raise capital by issuing shares of stock to the public. Companies seeking capital through an initial public offering (IPO), which is the process by which a company first sells shares of stock to the public.

An IPO is a significant event for a company, as it marks the first time the company's shares are available for purchase by the general public. The process of going public can be a complex and time-consuming one. Still, it offers many benefits to companies, including increased visibility, access to a larger pool of potential investors, and the ability to raise significant amounts of capital.

The first step in an IPO is the registration process. This stage involves the company preparing and filing a registration statement with the Securities and Exchange Commission (SEC). The registration statement includes detailed financial information about the company and its business and the securities being offered to the public.

Once the registration statement is filed, it is subject to review by the SEC. This process can take several months, and the SEC may ask the company to change the registration statement. Once the SEC is satisfied that the registration statement is complete and accurate, it will issue a "declaration of effectiveness," which means that the registration statement is effective and that the company can proceed with the offering.

The next step is the "roadshow," during which the company and its investment bankers meet with potential investors, such as institutional investors, to discuss the company and the offering. This is an opportunity for the company to promote its business and for investors to ask questions about the company and the offering.

After the roadshow, the company sets the price of the shares being offered and the number of shares to be sold. This stage is known as the "pricing" of the offering. The company and its investment bankers determine the price based on market conditions, the company's financial performance, and other factors.

Once the pricing is set, the shares are first sold to institutional investors participating in the IPO. This process is known as the "allotment" of the shares. The shares are then listed on the stock exchange, and trading begins, when the general public can purchase the shares on the open market.

The process of going public and issuing an IPO can be a complex one, but it offers many benefits to companies. It allows them to raise significant amounts of capital, and it gives them increased visibility and access to a larger pool of potential investors. However, it's also important to note that going public also involves additional regulatory requirements and reporting obligations.

IPOs are a significant event for companies that marks the first time that the company's shares are available for purchase by the general public. The process of going public can be complex. Still, it offers many benefits to companies, including increased visibility and access to a larger pool of potential investors, as well as the ability to raise significant amounts of capital.

FAQ

Q1: What is Indigo?

A1: Indigo is a fund that provides exposure to the U.S. public markets, targeting select ETFs, stocks, and Initial Public Offerings (IPOs). It aims to generate alpha by leveraging quantitative models and methodologies to identify high-potential companies preparing to go public.

Q2: How does Indigo select its investments?

A2: Indigo utilizes a proprietary selection model developed by Venture Science. This model evaluates the potential of upcoming IPOs based on various criteria including the company's financials, management team, market trends, and industry position. The fund also invests in select market-tracking ETFs to park idle capital until the next suitable IPO.

Q3: What is the fund's approach to risk management?

A3: Indigo’s strategy involves diversification across a broad range of sectors and companies, aiming to mitigate risk. While the fund actively pursues opportunities in IPOs, it is conscious of market volatility and economic conditions, adjusting investment strategies as needed.

Q4: Who is suitable to invest in Indigo?

A4: Indigo is suitable for accredited investors seeking exposure to the U.S. public markets and are comfortable with a higher risk-reward profile. Investors who are looking for a unique asset class to diversify their portfolio and who are interested in companies in the early stages of growth might find Indigo particularly appealing.

Q5: How frequently can I redeem my investment?

A5: Indigo has annual redemption windows every December. This allows investors to adjust their investment based on their individual financial goals and market conditions.

Q6: Where can I get more information about Indigo?

A6: For more detailed information about Indigo, please get in touch with our investor relations team.

Q7: How can I invest in Indigo?

A7: To express your interest in Indigo, please register here. Our team will contact you with further instructions on the investment process.

*Figures indicate IPO results averaged over all individual IPO exits.

From the Venture Science Blog