Why does a company need an investment bank to do an IPO?

Can't they just issue their own shares without an intermediary?

They could but its unlikely that they'd find a lot the type of purchasers that would buy the necessary number of shares to sustain a significant offering. In addition, you normally want the shares to be held by larger institutions that will not immediately dump the shares so that you have aftermarket stability.

In addition, the investment bank normally provides important advice on pricing -- high enough to generate adequate capital but not so high as to discourage initial purchase and a healthy secondary market.

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