Cons

IPO has the following disadvantages:

• IPO is expensive, for example, you have to pay for high banking, legal, and marketing fees. After an IPO, the company has ongoing expenses to prepare mandatory financial/regulatory reports, accounting, tax, and other business information.
• There's a risk of reducing an IPO price significantly if the company is not well perceived by the public investors.
• The dissemination of information to the public may put the company at a disadvantage to its competitors.
• It may be more difficult for founders to control the company effectively due to diluted ownership.
• It's open to legal issues such as lawsuits from shareholders or government agencies.

An IPO is usually underwritten by one or a syndicate of investment banks. The investment banks work with founders or a management team throughout the process of the IPO. For instance, the investment banks prepare roadshows, set up a target price range, build a book, arrange for the shares to be listed at one or more stock exchanges, and so on.

More specifically, a typical IPO process may include the following steps:

1. Present a plan to the board of directors to gain an approval
2. Appoint a task force team
3. Prepare and review financial information about the company
4. Send letters of intent to prospective investment banks and select a lead underwriter
5. Draft the preliminary prospectus, that is, a business statement describing the company and prepared for potential investors
6. Underwriters complete a detailed due diligence investigation of the company
7. Present the company profile and preliminary prospectus to SEC for registration and review
8. Assemble a syndicate of investment banks for accessing and selling shares to a larger pool of potential investors
9. Start roadshows by having meetings with potential investors and analysts
10. Underwriters build the book by collecting names of investors and the number of shares
11. Decide on the offering size and set up a target price range
12. On the IPO day, the syndicate of investment banks set up a primary market, allocate their shares to investors proportionally based on the book, and start trading shares at the secondary stock exchanges afterward.