What happens to existing shareholders in an IPO?

Question

In a 50 :50 JV company goes for an IPO , what happens to existing shareholders/promoters after the IPO. Do they have to retain 20% holding in the company as per guidelines ? At what value per share they will sell the balance shareholding? How the price is decided ? Please help

Answer 1

When a company is privately owned, the founders, certain members of the management team (or all the employees, depending on the company) and private investors who helped fund the company all hold shares in the company. Those shares will have little value since they aren't publicly traded. After the company's IPO, those shares can increase in value by a huge margin. In short, anyone who has a lot of those shares could become very rich by selling them.

The following articles will make this clear to you.

Great Wolf Resorts' IPO Could Pay Off Big for Existing Shareholders (1st link)
Insiders Get Rich Through IPO (2nd link)