A B C D E-F G H I-J K-L M-N O P Q R S T U V-Z

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Penalty bid
To discourage individual investors from quickly selling IPOs, some brokerage firms impose a penalty bid on the individual broker if his or her client sells an IPO within a certain period of time. Thus, a broker who would incur a financial penalty if a client wants to quickly sell an IPO has a built-in conflict of interest. Long a little publicized practice, penalty bids are now receiving greater scrutiny by the SEC and some state regulatory agencies. In any case, individual investors should find out ahead of buying an IPO whether the brokerage firm imposes penalty bids. However, if your broker fails to return telephone calls or fails to sell securities as you direct, you should seriously - and immediately consider - changing brokers.

Pinks
This is a form of a preliminary prospectus containing no price range or number of shares sometimes used by foreign companies doing an IPO in the US. The proposed price range and estimated number of shares to be offered is stated in the preliminary prospectus. The actual offering price and number of shares is eventually set and published in the final prospectus.

Pipeline
Once a company files its registration statement (or S-1) with the SEC, it becomes part of the pipeline of IPOs expected to be priced over the next few months. It usually takes an IPO eight weeks to emerge from SEC review to its offering.

Postponed
This is what happens when an IPO fails to attract sufficient buyers. Sometimes the lead manager will lower the price to entice buyers. When a deal is postponed, it usually takes at least six months for an IPO to hit the comeback trail. Examples of big name IPOs that had successful debuts the second time around after being postponed were Donna Karan and Goldman Sachs.

Preliminary Prospectus
This is the offering document printed by the company containing a description of the business, discussion of strategy, presentation of historical financial statements, explanation of recent financial results, management and their backgrounds and ownership. The preliminary prospectus has red lettering down the left hand side of the front cover of the prospectus and is called the "red herring." It is the company's principal marketing document. Management, when touring on the road show, is limited to discussing only the information contained in the prospectus.

Premium
In a perfect world, IPOs are designed to be priced at a discount to existing publicly traded companies. In theory, this is meant to reward early investors for buying an unseasoned company with no public track record. In reality, it is the lead manager's educated estimate on the highest price at which there will be solid demand for the IPO, both on the offering and in the aftermarket. The difference between the IPO price and its opening price is called the premium. Some investors think the difference between the IPO price and the price at the first day's close is a better measurement of the IPO premium due to the confusion that normally surrounds balancing buy and sell orders at the opening.

Price Range
When a company files an IPO with the Securities and Exchange Commission (SEC), it is required to state at what price it expects to price its offering. This price is normally expressed as a range with a spread of two or three dollars. For example: $10 to $12 or $15 to $18. The proposed price range is generally, but not always (see Quiet Filings), set at the time the company makes its IPO filing with the SEC. Going forward, the proposed price range may be adjusted up or down depending on market conditions and investor reaction to the proposed price.

Proceeds
Companies go public to raise money. The money raised is referred to as proceeds. In every prospectus there is a section entitled "Use of Proceeds". Investors should read this section to find out whether the company plans to use the money it raises in the IPO for capital investment (good) or to pay off insiders (bad).

Prospectus
The official selling circular that must be given to purchasers of new securities registered with the Securities and Exchange Commission. It highlights the much longer Registration Statement file with the Commission.

Public Venture Capital
A derogatory term used to describe a company in an early stage of development - that is, lacking revenues, operating profits and perhaps even products - that ordinarily would be financed with private capital before accessing the public markets via an IPO.

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