What is IPO ? | How to Invest in IPO in India | BY INVEST THERAPY

14 Oct 2023

What is an IPO

What is an IPO? 
IPO or Initial Public Offering or Stock Market Launch is a type of public offering where the company sells its Shares for the First time to Institutional Investors retail investors or individual investors. In other words When a Company Issues there Shares to the public for the First time it is Called an IPO. Meanwhile, it also allows individual investors to participate in the Offering.

Why Company Offer IPO?

  • When every company needs money (To expand their business, Repay Loans, etc.) They Offer IPO. 
  • When a Company Lists its Shares on the Stock Market it increases Liquidity. It opens the door to employee stock ownership plans like stock options and other compensation plans.
  • Shares listing on Stock Market means the Company Is going to the public. The company is gaining enough success to flash its name on the Stock Exchange. It increases Credibility and Pride For any Company.
  • A public company can issue more stocks in a Demanding Market. So The company can issue an IPO when they need Money.

How Company Launch IPO : 

  • A company before it became a public Company it hired an Investment bank to handle the IPO.
  • The company and the Investment bank work with the Financial Details of the IPO in the Underwriting Agreement.
  • After that Investment Bank File Underwriting Agreement to Registration Statement To SEC (Securities and Exchange Commission).
  • In the end, SEC checked and disclosed the information, and if everything was found right SEC announced the date of launching the IPO.
  • After that, the Initial Prospectus Which contains the Estimated price per share and other information related to the IPO which is called the "Draft and Red Hearing Document" is shared with the people who are involved in launching the IPO.
  • After that IPO was launched at his Fixed Price or Book Value.
  • On the SEC announcing date, the application form and prospectus are made available to the public online and Offline.
  • In the end When the IPO price is Finalized the Shareholders and the underwriters Decide how many shares will every investor Receive.

In the below image, you will understand how the Company launched its IPO : 

How to Invest In IPO :
You can Invest In an IPO With The Help Of a Discount Broker.

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