IPO or Initial Public Offer means Initial Public offering. It is a process that allows the private company to turn into a publicly held company wherein it offers its securities to the public for sale for the first time. An IPO enables the company to list its name on the stock exchange.
Securities can be traded in either of the two markets i.e. primary or secondary. An IPO is launched in a primary market.
Growth & expansion
The apparent reason behind issuing an IPO is to raise money for business expansion and growth. It is a direct opportunity for the public to invest in the primary market and become a company’s investor or stakeholder.
Credibility & acknowledgment
It is an effective way to enhance their credibility in the market. In addition, an IPO offers a large-scale public acknowledgment to the company where the public gets to learn about its operations and market presence.
Worth of the company
It is an apt way to know the worth of the company. It would open prospective opportunities for ventures & mergers to the company. It also enables public stakeholders and investors to know about the financials and growth prospects of the company. It would help them in making a decision on whether to invest or not.
Apart from individual investors, the following can also invest in an IPO:
If you are a new investor, the red herring prospectus may seem daunting to read. A red herring prospectus is a document drafted by the company, submitted & approved by SEBI, and issued to the public. It is a document that contains detailed information about the company’s plans and financials.
It includes how the company would use the received money from the IPO, its present shareholding pattern, probable risks associated, growth objectives, SWOT analysis for review, and many more. It is advised to study the financials and other important information about the company. It facilitates making the right investment decision.
There are two types of IPO offered by the issuing company. One is a Fixed Price offering and the other is a Book-building offering.
Underwriters are the expert(s), belonging to a financial organization, who are qualified to evaluate the risk of investors in any investment. They are hired by the IPO issuing company to raise investments by offering new securities. If you want to test the success probability of an IPO, check out the names of underwriters. If they are big and reputed then the chances of hitting success are more.
A Lock-up period means a ‘duration of time’ during which the company’s personnel, management, and investors are not meant to sell their shares. It usually is declared when a company witnesses a downfall after the IPO goes public. As soon as the lock-up period ends, the share prices of that company on stock exchanges see a fall in their stock prices.
If you are willing to invest in IPOs then keep in check the following vital things:
Get all the updates and more information about forthcoming IPOs on our fast and reliable platform. We help in providing you with accurate news about the Demat account, trading process, and securities. We strive hard to meet your trust and expectations.
The price at which investors get shares is known as the cut-off price.
High Net-Worth Individual is is a part of the Non-Institutional Investor Category with a 15% reservation of IPO shares. HNI is an investor who has total investable assets over Rs. 2 crore
Where the investor can check valuation of the company before the stock is traded in public
The listing price of an IPO is determined by market demand. Strong demand can lead to a higher listing price. Demand is influenced by factors like the company's sector and growth potential.
The allocation of shares in an IPO depends on the demand for the shares. If the IPO is under subscribed, investors may receive all the shares they applied for. If the IPO is oversubscribed, the allocation of shares to retail investors is done through a computerized process.
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