IPO … Initial Public Offering, That is, the first time a company sells its shares to the public is called an IPO. Usually, any company wants to expand
What is the mean of IPO(Initial Public Offering);
IPO … Initial Public Offering, That is, the first time a company sells its shares to the public is called an IPO. Usually, any company wants to expand further or pay off its debts, Or building a new plant elsewhere will require some capital or high money. The company sells its company shares to the public in order to collect that money from the public.
However, the company has to apply to SEBI to sell the shares before then. The company will go for IPO after getting approval from SEBI. Also at what price does the company want to sell its shares to investors, How much money is going to be raised through the actual IPO, How many shares does it want to sell, Releases all details such as when to go to IPO. Unlike your usual buying of shares in this IPO, You will need to apply for shares. However, there is no guarantee that you will get those shares. Because if the company applies for more shares than the number of shares it wants to sell, Only a few of them own those shares. If you do not receive the shares then your money will be refunded.
Let us know some of the words used in IPO and their meanings:
Price Band and Cut off price:
That is the price band that tells the company in which price range they want to sell the shares. For example, suppose a company sets the price band at Rs.270 - 300. That means we can apply to buy shares at any price between 270 and 300.
Oversubscription:
That is, suppose the company issues 10,00,000 lakh shares for sale through an IPO. But if you apply for 20,00,000 lakh shares, it is called oversubscription.
Under Subscription:
That means the company wanted to sell 10,00,000. But if less than 10,00,000 lakh people apply for those shares, it is called Under Subscription.
From applying to buy shares in an IPO in general, The entire process that takes place until the company is listed on the stock exchange also takes place in the primary market. Once the shares are so listed on the stock exchange the company will go into the secondary market. That is, what we buy and sell shares on a daily basis is called the secondary market.
Let’s take a company as an example for a better understanding.
These are the IPO details of a company called CDSL;
Issue Open: Jun 19, 2017 – Jun 21, 2017
Issue Size: 35,167,208 Equity Shares
price band: Rs 145 – Rs 149 Per Equity Share
Minimum Order Quantity: 100 Shares
Now let us learn about this in some detail:
Issue Open: Jun 19, 2017 – Jun 21, 2017:
This means that the issue of the company's IPO will be open from June 19 to June 21. So anyone who wants to buy CDSL shares will have to apply for shares on those dates.
Issue Size: 35,167,208 Equity Shares:
It wants to sell 35,167,208 shares of the company's stock to the public.
price band: Rs 145 – Rs 149 Per Equity Share:
As we said earlier, if we want to buy shares between Rs 145 and Rs 149, we have to choose at what price we want to buy the shares. Here is a piece of advice for you... If you want to get shares in an IPO, select the highest price in the price band. Doing so will give you a chance to get shares.
Minimum Order Quantity: 100 Shares:
That means you have to participate in this IPO which means you have to buy at least 100 shares.
However, CDSL shares were listed on the stock exchange on June 30. However, the response was 170 times higher than the number of shares issued by the company, which meant that the share price rose to 80% as soon as the shares were listed on the exchange. That means the share price, which should have been Rs 149, has gone up to Rs 250. Those who got shares in that IPO got 80% profit in a single day.
However once in a while, the shares of a single company do not get the expected response The share price will be recorded lower. At such a time investors run the risk of losing.
Let's take a look at some of the things that need to be carefully considered in order to avoid losses in the IPO.
1) What is the history of the company coming to IPO? How long has that company been around?
2) What does that company actually make? Or what services does it provide?
3) Who runs that company? How is that company management?
4) How many assets does the company have and how much debt does it have?
5) What is the future of that company going to be?
6) Are there any previous corruption allegations against that company or are there any problems with that company?
Know all the details like this and then buy shares in IPO.
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