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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Recapitalization
Companies change the structure of its debt and equity because they have too much debt and too little equity or because interest rates have dropped. A recapitalization is akin to a mortgage refinancing for an individual. Typically, when a company uses an IPO to recapitalize, it uses the proceeds to pay off some of its debt and replaces the remaining debt with new debt obtained on more favorable terms.

Red Herring
This is the term of art for the preliminary prospectus. It gets its name from the printed red disclaimer on the left side of the prospectus.

Registration Statement
To go public, a company must file a registration statement with the SEC. This document, filed electronically via EDGAR, contains a description of the company, its management and its financials. The material is reviewed by the SEC for its completeness, amount of disclosure and its presentation of accounting information. The IPO cannot go forward until the SEC is satisfied with the document. In some cases such as when the SEC takes issue with a company's accounting methodology, the registration process can take months.

Reverse LBO
A common investment strategy is for the management of a company or a financial group to acquire a company using debt. Buyouts are usually highly leveraged, hence the name LBO. When the owners decide to use the IPO market to reduce the company's debt load, the process is called a reverse LBO, because they are replacing debt with equity. They are able to accomplish this only if they have improved the operations of the company sufficiently to attract public equity holders.

Road Show
When a company launches its IPO, management schedules a nationwide series of lunches, breakfasts and dinners to make its pitch to institutional investors. These presentations are organized by the lead manager and are held at hotel dining rooms in major cities. Usually, but not always, the road shows start overseas, then move to the West Coast and finish in New York or Boston, which have the highest concentrations of large institutional investors. For particularly hot IPOs, these presentations attract hundreds of investors who are jammed 10 or 12 to a table.

Roll-up
This is an IPO of independent companies in the same industry that merge into a single company at the time of the offering. Mostly used in fragmented industries, the approach has been applied to equipment rental firms, floral distributors, office products distributors, travel agencies, temporary staffing organizations, dental practices and car dealerships. The financier most associated with the concept is Jay Ledecky, who took public US Office Products, US Floral Products and Consolidated Capital, which invests in roll-ups.

 

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