Initial Public Offering (IPO) is the process through which a company goes public and allows people to buy its shares at a predetermined price. It is a great opportunity for investors to invest in companies that they find lucrative.
What is the full form of IPO?
IPO refers to “Initial Public Offering” which is an event where a company’s shares can be purchased by the public on a stock exchange. IPO allows a privately held company to become a publicly traded company.
What is issue price?
Issue price is the price at which shares are offered to investors during an IPO. The company’s financial position, market value, pricing strategies etc; are important in determining the issue price. This price is usually a discounted price meant to attract investors to buy more shares and it plays a major role in the success of an IPO.
What is an SME IPO?
An SME IPO refers to a Small and Medium Enterprises Initial Public Offering. SME IPO is meant to focus on small and medium sized enterprises, helping them in raising capitals for expansion, acquisition and work capital needs. SME IPO is beneficial for businesses as it helps them financially, increases their visibility and is a good way to enter the market and attract investors.
What is an IPO cycle?
An IPO cycle refers to the entire IPO process. Here’s a complete breakdown of the process:
Preparatory phase: This phase involves evaluating the company’s financial condition as well as the market condition. The company also hires specialists to assist the entire IPO process. It is also ensured that the company obliges with the rules and regulations.
Regulatory approval: Then the company fills the IPO application and the authorities make sure that the company follows all necessary regulations.
Marketing: The company markets its initial public offering to gain the interest of the general public.
Offering period: In the offering period shares are offered to investors at the set price.
Listing and Post IPO: Now, the shares of the company are listed on a stock exchange. Post the IPO process, the company is constantly required to meet the regulatory requirements.
What is Red Herring Prospectus?
Red Herring is a version of prospector that a company needs to file with the appropriate regulatory authority as a part of the entire IPO process. It is like a draft prospectus that is released for the public before the review process starts. Generally the information stated in the red herring prospectus is subject to change and an investor must review the final prospectus before deciding anything.
What is book building?
Book building is a process which helps a company determine the prices at which it is going to sell its shares to the investors at an IPO. For the process, they hire underwriters in order to ease up the IPO process. The company, along with underwriters, determines the price range of IPO shares. After this, there is a bidding period where investors can submit their bids within the price range and then the underwriters determine the most suitable share price. Book building is a comprehensive process that allows investors to take part in the process.
What is IPO subscription?
IPO subscription is also known as the IPO bidding process during which the investors who are interested in buying the shares of the company can submit their bids stating the price at which they would wish to purchase the shares. The subscription period generally lasts for several days.
What is the difference between an IPO and share?
The main difference between an IPO and a share is that a company undergoes the IPO process to raise capital whereas a share is used to transfer ownership and offer liquidity for existing shareholders.
| IPO | Share |
| Issued by the company that wants to be traded publicly | Issued by private as well as public companies |
| Takes place in primary market | Can be traded in both primary as well as secondary markets |
| Involves underwriter, predetermined price offerings and approval of the regulatory authority | Can be bought and sold to existing as well as new investors |
Who can invest in IPO?
Any individual, be it the general public or institutional investors can invest in an IPO. The point of an IPO is to make the shares of a company available to the general public at a discounted price and improve the company’s financial capital.
Is it good to invest in IPO?
Investing in an IPO is a great opportunity if the company has a scope for growth. One must research the company’s financial state, the market in which it depends, the price of the shares and other related factors before investing in an IPO. While an IPO can add diversity to your investment portfolio, it also comes with risks such as price volatility.
What is the cutoff price in IPO?
The cutoff price is known as the final price at which shares are sold to investors at an IPO. This is the price which is finalized after the book building process and shares are sold without any discounts at this price.
How to apply for the IPO?
- To apply for the IPO, you must visit one of the trading interfaces like Alice Blue and login to the IPO console.
- Select the IPO type and fill details like open date, closing date, etc;
- After this, you need to enter your UPI ID which should be linked to your personal bank account.
- Then, you are required to place a bid and once you have completed these steps, you can read the declaration and submit the form.
- Once submitted, you will receive a mandate request on your UPI and if the quantity is allotted to you, money will be debited from your bank account and the shares are transferred to your Alice Blue demat account.
- Once you submit your bid, you will receive an SMS confirming your application.
How to sell IPO shares?
Here’s what you need to do in order to sell IPO shares:
- Find out whether you are eligible to sell IPO shares or not.
- Find potential buyers. You can also use a market platform.
- Prepare necessary documents and then execute the sell order with the price you have set.
Who decides the price band?
An underwriter hired by the company is responsible for deciding the price band. The underwriter analyzes numerous factors such as the market conditions, the price investors are willing to pay etc; and then determines the appropriate price.
What is Book Building – Quick summary
- Book building is the process in which a company determines the price of the shares and it also involves bidding from potential investors.
- During this process, the underwriter determines a price range and then investors are asked to bid their offer prices.
- After collecting all the information, the underwriter analyzes these bids and sets the final price.
- Shares are distributed among the investors depending upon this price.
- If you wish to know more about finance, trading and other related terms, you should visit Alice Blue, a firm that aims at facilitating online trading for you.
