describe the process of a competitive IPO, what are the pros and cons?
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Not exactly sure what you mean by a competitive IPO, but here goes.
A company is in need of capital (money) to grow. It decides to sell shares to the public and thereby list on an exchange (NYSE, AMEX, Nasdaq, London, etc.)
They hire an investment banking firm to assist in finding buyers for the sale of shares to investors. With the investment bankers, their own attorneys, and accountants, they prepare a prospectus which is a disclosure document detailing everything about a company, i.e. finances, managment qualifications, industry competitors, risks associated with their industry, etc., everything except trade secrets which an investor needs to make an informed decision as to whether or not they want to purchase shares. They file the prospectus with the SEC and after a short waiting period to allow for the SEC to ask for any additional information, the investment bankers and company officers (CEO, COO, CFO) go around the country (this is called a road show) to meetings with potential investors to answer questions and explain why their company would be a good investment. At this time the investment bankers begin calling investors (stock funds, pension funds, investment funds, individuals) and accept conditional orders for x amount of shares they would be interested in buying within an estimated price range. This is called building a book (of orders) When they have a balanced amount of orders for as many shares as they can sale within the estimated price range they inform the company that the deal ready to price and issue. The company delivers the agreed upon number of shares to the bankers and they set the price and allotment of the numbers of shares each investor will receive, in the event of an oversold offering. The orders are accepted and converted into sales and then the listing exchange is informed to allow the shares to begin trading. The price will then rise and fall according to the demand of the market.
This is the most commonly used competitive method of raising capital by companies. Google is the largest known company to successfully complete a company run “Dutch auction” of its shares when they went public several years ago.
All in all, most companies prefer to hire the investment bankers and let them manage the sale, for a fee, of course.
Hope this helps-good luck.