IPO listing gain refers to the profit an investor makes when the stock price of a company on its listing day is higher than the IPO price. It represents the immediate market performance of a company’s shares after going public.
Table of Contents
What Is Listing Gain In IPO?
The listing gain in an IPO refers to the profit made by investors when a company’s share price rises above the issue price on the first day of trading. It indicates a strong market reception to the company’s listing.
These gains occur when the market value of shares exceeds the initial offering price after the stock is listed on the exchange. Listing gains can vary based on investor demand, market conditions and the company’s fundamentals.
Listing Gains In IPO Example
Listing gain refers to the profit an investor makes when the price of an IPO stock increases on its first day of trading after being listed on the stock exchange. It is calculated by subtracting the IPO price from the listing price.
For example, if an IPO was priced at ₹100 per share and the stock opens at ₹150, the listing gain would be ₹50 per share. This gain reflects the market’s initial response to the company’s public debut and investor demand.
How Do IPO Listing Gains Work?
IPO listing gains occur when the stock price of an IPO rises on the day it is listed on the stock exchange, creating a profit for investors. The difference between the IPO price and the listing price represents the gain.
Investors who buy IPO shares at the offer price can sell them once listed. If the stock opens higher than the offer price, they can make a listing gain. However, listing gains are not guaranteed, as stock prices may fluctuate after listing.
How is the IPO Listing Price Decided?
The IPO listing price is decided through a process called price determination, where the company, along with underwriters, sets the final offer price. This is based on factors like the company’s valuation, market conditions, investor demand and financials.
During the IPO process, underwriters conduct a book-building process, gauging investor interest in different price bands. The final listing price reflects the equilibrium price that the company believes will maximize demand, raising sufficient funds while offering an attractive entry point for investors.
IPO Subscription Vs Listing Day Gain
The main difference between IPO subscription and listing day gains lies in their timing and nature. Subscription refers to the process of applying for shares before the IPO while listing day gain reflects the change in the stock’s price on the exchange.
| Aspect | IPO Subscription | Listing Day Gain |
| Timing | Occurs before the IPO is listed. | Happens on the listing day after shares are traded. |
| Nature | Investors bid for shares at a price band. | Measures the difference between issue price and market price. |
| Focus | Focuses on securing shares in the IPO. | Focuses on the immediate profit or loss after listing. |
| Profitability | Returns depend on the IPO’s issue price. | Returns are based on the difference between issue and listing prices. |
IPO Listing Gains Tax
IPO listing gains refer to the profits made when the shares of a newly listed company are sold at a price higher than the issue price on the listing day. These gains are subject to taxation.
In India, IPO listing gains are considered short-term capital gains (STCG) if the shares are sold within one year of purchase. The tax rate on STCG for listed shares is 15%. If the shares are held for over a year before selling, the gains are classified as long-term capital gains (LTCG), which are taxed at 10% above ₹1 lakh.
To understand the topic and get more information, please read the related stock market articles below.
What Is Listing Gain In IPO? – FAQs
Listing gain refers to the price difference between the IPO price and the stock’s market price on the listing day. Investors can realize a profit if the stock price increases on debut.
The listing price is decided based on the price set during the IPO subscription process, which is influenced by underwriters, the company’s valuation and demand from investors.
Listing gain is calculated by subtracting the IPO price from the listing price on the stock exchange. Multiply the result by the number of shares allotted to determine the total profit.
Yes, IPO listing gains are taxable as capital gains. If the shares are sold within one year, they are considered short-term capital gains and taxed at 15%. Long-term gains are taxable if held for more than one year.
After the IPO listing, the shares begin trading on the stock exchange. The company’s stock price fluctuates based on market demand, investor sentiment and company performance.
Yes, the listing price can be lower than the IPO price if the stock faces lower demand or adverse market conditions. This can lead to losses for IPO investors.
Yes, tax is applicable on IPO listing gains. These are treated as capital gains, with short-term capital gains taxed at 15% and long-term capital gains tax based on the holding period.
GMP (Grey Market Premium) is the premium at which an IPO is traded before listing while listing gains refer to the actual profit made once the stock is listed on the exchange.
Disclaimer: The above article is written for educational purposes and the companies’ data mentioned in the article may change with respect to time. The securities quoted are exemplary and are not recommendatory.
