Initial Public Offerings
Stocks are introduced into the
market through an initial public offering (IPO). In most cases, an IPO would
need to be registered, which applies a set of guidelines to the offering to
determine whether the offering is "fair, just and equitable."
Although the "merit" system of applying those guidelines is not
foolproof, fraudulent offerings are rejected and not granted registration.
Sources of information
The prospectus is the most
comprehensive source of information about an IPO. It sets out where your
investment money will be used, describes the capitalization, history and
management of the company and describes the cash flow system of the company.
Periodic reports filed with the
U.S. Securities and Exchange Commission have updated information about
companies that register with the SEC.