The IPO process starts when a registration statement gets filed with the SEC. The date that the SEC receives the registration statement is known as the filing date. This registration statement discloses information about the company's operations, management, securities, and the purpose of the public offering.

Next there is what is known as the 20 day cooling off period (the time period for the new stock issue between filing the registration statement and the effective date). During this 20 day cooling off period, the SEC reviews the information provided.

1. Red herring (preliminary prospectus)
2. Blue sky the issue (register it)
3. Due diligence meeting (careful consideration of the new issue). Meeting that assures all pertinent information has been considered and make sure everything satisfies federal and state laws.

After the cooling off period, the new stock issue begins trading in the secondary market. The day this happens is called the Effective date.

Other related terms you might hear about:

Deficiency letter - a notice sent by the SEC to the issuer of the new issue regarding omissions of material fact in the registration statement. The SEC thinks the registration statement has material deficiencies. This either post pones the effective date, or can be a stop order that prohibits the sale of the securities all together.

Shelf registration - a method of new issue registration that allows the issuer some flexibility regarding the timing of the issue (usually up to two years. They can only register an amount they can reasonably be sold within 2 years. (This allows the issuer to sell when market conditions are the most favorable).

Rights - giving existing stockholders a chance to buy shares (in proportion with what they currently own) in the new issue. The piece of paper showing this privilege is called a right. Because companies usually offer additional stock at below market price, rights often have value of their own and are also actively traded.

Investment banker - the underwriter that helps a corporation issue the new securities to the public.