What is the role of lead managers in an IPO?
Introduction
The lead manager is part of the financial department whose key function is to issue new shares Companies call for lead managers when they want to initiate and manage an IPO. The quality of skills and decision-making of the lead manager can lead to the success or failure of the entire shares issued. They are also known as Merchant Bankers or Book
Running Lead Managers (BRLM)
The lead managers are extremely important in the IPO process and look after the entire process They are crucial for preparing the registration statements, getting in touch with the required authorities, and overseeing the distribution of shares to the investors The lead manager must make sure to complete the IPO process keeping in mind all the rules and guidelines.
Functions of a lead manager
● The lead manager has the role of preparing the framework of the new issue according to the company's financial requirements and investors' expectations.
● Lead managers are also responsible for creating draft prospectus to hook new investors to apply for the company’s shares.
● The lead manager communicates with the brokers, financial institutions, and investors so that there is no problem bringing the shares into the market
● They make underwriting agreements with financial institutions, banks, and investors to ensure that the issued shares are fully subscribed within the specified time frame
● The lead manager sends all the required company documents and letters that are essential for listing the stocks on the Stock Exchange
Responsibilities of the lead manager Conducting Market Research
The IPO lead manager has the responsibility of conducting detailed market research They also help with data analysis, competitor research, and investor outreach which helps them to get all the information about the current market, and examine the level of interest for the company's shares.
Determining the Valuation of the company
The IPO lead manager decides the initial pricing of the company’s shares. They also make sure that the price they decide, reflects the company's financial performance and its future potential
Marketing and Promoting the IPO
Lead managers are also responsible for marketing and promoting a company's IPO to the potential investors, interacting with media to generate positive press coverage, and creating presentations for investors to hook their interest They also help investors communicate with the company’s management team.
The lead manager must also have a good network of investors who can help them in the IPO process The network of investors can help with the generation of demand for the IPO It can also help lead managers in finding potential buyers The network can help lead managers in determining the right price for the share. Investors can also help the manager understand what they are willing to pay for the shares so that the lead manager can price the shares accordingly The network can also help to gather more information about the issuing companies. The manager can get better knowledge about the company's financial performance and future predictions.
Conclusion
Overall, the lead manager plays a critical role in ensuring the success of an IPO by managing the various components of the process and acting as the main point of contact for the issuing company, underwriters, and investors
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