Editing Initial public offering (section)

===Allocation and pricing===
The sale (allocation and pricing) of shares in an IPO may take several forms. Common methods include:
*[[Best efforts contract]]
*[[Firm commitment contract]]
*[[All-or-none contract]]
*[[Bought deal]]
Public offerings are sold to both institutional investors and retail clients of the underwriters. A licensed securities salesperson ([[Registered Representative]] in the US and Canada) selling shares of a public offering to his clients is paid a portion of the selling concession (the fee paid by the issuer to the underwriter) rather than by his client. In some situations, when the IPO is not a "hot" issue (undersubscribed), and where the salesperson is the client's advisor, it is possible that the financial incentives of the advisor and client may not be aligned.

The issuer usually allows the underwriters an option to increase the size of the offering by up to 15% under a specific circumstance known as the [[greenshoe]] or overallotment option. This option is always exercised when the offering is considered a "hot" issue, by virtue of being oversubscribed.

In the US, clients are given a preliminary prospectus, known as a [[red herring prospectus]], during the initial quiet period. The red herring prospectus is so named because of a bold red warning statement printed on its front cover. The warning states that the offering information is incomplete, and may be changed. The actual wording can vary, although most roughly follow the format exhibited on the Facebook IPO red herring.<ref>{{Cite web|url=https://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/d287954ds1.htm|title=Registration Statement on Form S-1|website=U.S. Securities and Exchange Commission |date=February 1, 2012 |access-date=10 December 2017}}</ref> During the quiet period, the shares cannot be offered for sale. Brokers can, however, take [[indication of interest|indications of interest]] from their clients. At the time of the stock launch, after the Registration Statement has become effective, indications of interest can be converted to buy orders, at the discretion of the buyer. Sales can only be made through a final prospectus cleared by the Securities and Exchange Commission.

The final step in preparing and filing the final IPO prospectus is for the issuer to retain one of the major financial "printers", who print (and today, also electronically file with the [[U.S. Securities and Exchange Commission|SEC]]) the registration statement on Form S-1. Typically, preparation of the final prospectus is actually performed at the printer, wherein one of their multiple conference rooms the issuer, issuer's counsel (attorneys), underwriter's counsel (attorneys), the lead underwriter(s), and the issuer's accountants/auditors make final edits and proofreading, concluding with the filing of the final prospectus by the financial printer with the Securities and Exchange Commission.<ref name="InvestorPlace">{{cite web |title=The Main Players In An Initial Public Offering |date=26 February 2012 |url = http://investorplace.com/ipo-playbook/the-main-players-in-an-initial-public-offering-ipo/#.U88EE_ldVaQ |website=InvestorPlace |first1= Tom |last1=Taulli |access-date=22 July 2014 |url-status=dead |archive-url=https://web.archive.org/web/20140724174832/http://investorplace.com/ipo-playbook/the-main-players-in-an-initial-public-offering-ipo/#.U9FHBZ3P1qZ |archive-date= 2014-07-24}}</ref>

Before legal actions initiated by New York Attorney General [[Eliot Spitzer]], which later became known as the [[Global Settlement]] enforcement agreement, some large [[Financial institution|investment firms]] had initiated favorable research coverage of companies in an effort to aid [[corporate finance]] departments and retail divisions engaged in the marketing of new issues. The central issue in that enforcement agreement had been [[Declaratory ruling|judged]] in court previously. It involved the conflict of interest between the [[investment banking]] and [[Financial analyst|analysis]] departments of ten of the largest investment firms in the United States. The investment firms involved in the settlement had all engaged in actions and practices that had allowed the inappropriate influence of their research analysts by their investment bankers seeking lucrative fees.<ref name=" one">{{cite web |title=Ten of Nation's Top Investment Firms Settle Enforcement Actions Involving Conflicts of Interest Between Research and Investment Banking |website=SEC |date=28 April 2003 |url=https://www.sec.gov/news/press/2003-54.htm |access-date=23 July 2014}}</ref> A typical violation addressed by the settlement was the case of [[Credit Suisse First Boston|CSFB]] and [[Salomon Smith Barney]], which were alleged to have engaged in the inappropriate spinning of "hot" IPOs and issued fraudulent research reports in violation of various sections within the [[Securities Exchange Act of 1934]].