Know everything about IPO : Meaning,Investment,Process

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An Initial Pubic Offering (IPO) is a process in which a private company sells it’s shares to public for the first time in secondary market.

What is Initial Public Offering ?

An Initial Public Offering (IPO) is a process through which a private company offers it’s securities (shares) to the public for the first time to raise the equity capital from public investor.

The process of IPO transforms the company from private held to public listed. It provides a company access to fund through the public capital market.

An ipo is the great opportunity for smart investors to earn a good profit in the short period of time on their investments.But every ipo is not a good opportunity for investors to earn handsome returns on their investments.

Types of IPO

There are two types of IPO :-

1.Fixed Price offering :

In the fixed price method  the price is pre-determined before the issue. Demand for the securities can be known only after the issue is over.

2.Book Building offering :

In this offering method , the company initiating an IPO offers a 20% price band on the stock to the investors. Interested investors bid for the shares before final price is decided.

Price is determined after receiving the bids.it is widely popular in developed markets.It is also prefered in indian market

Keyterms of IPO :

1. Open / Issue Date :- The date on which investors can start bidding for the ipo.

2. Close Date :- The final or last date until an invetor can bid for the ipo.

3. Allotment date :- Shares alloted to the successfull  bidders on this date.

4. Listing Date :- The date on which shares get listed to stock exchanges (NSE, BSE).

5. Price Band :- It is defined as a value-setting method in which the seller offers an upper and lower cost limit, the range within which the interested buyers can place their bids.

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