An IPO is the action whereby a private business offers shares to the general public and institutions, making the company a publicly traded one. Let’s understand everything we need to know about this in detail.
IPO: Full Form, Meaning and Significance?
An Initial Public Offering (IPO) is a public offering in which a company sells its shares to the general public for the first time, enabling it to raise funds from the public and become public as well as private ownership. Anyone can now purchase a part of the business, become a part of its growth, and enjoy its profits and losses.
IPO: Why Do Companies Issue IPOs?
Firms issue IPOs to raise funds for growth, expansion, or debt settlement. It also provides a platform for early private investors to exit through selling shares, enhancing liquidity and enhancing the company’s public image and credibility. IPOs tend to gain greater media coverage and investor interest, ushering in greater business opportunities.
IPO: How to Apply
Application for an IPO is easy and convenient:
- Look for currently floated IPOs on your broker’s app or website.
- Read the official IPO prospectus to access detailed company information, financials, lot size, and price range.
- Determine the number of shares you wish to purchase, considering the minimum lot size.
- Apply online, usually through UPI (Unified Payments Interface) or ASBA (Application Supported by Blocked Amount) through your bank or broker.
- The amount of application is held in your account until allotment.
- After allotment, shares are credited to your demat account and may be sold or held.
Key Facts To Keep In Mind
- Not all IPOs are good investments, read the prospectus and company information first.
- IPO shares have potential risks since the company doesn’t have a history as a public company.
- IPOs are priced by underwriters; in some cases, the listing price may vary from the initial issue price.
Tips on IPO Investment
- Check the company’s history, business, and financial status prior to applying.
- Invest only if you can afford to, as IPO shares may fluctuate in the first few days.
- Utilise reputable brokers and websites to prevent scams.
An IPO is a significant corporate milestone and a feasible pathway for investors to share in a company’s future, provided they analyse the fundamentals and move carefully.
