What Is an Initial Public Offer
Many of us have a better understanding of banking and insurance, but when it comes to investment, we don't have much knowledge of share market, mutual funds, bonds, securities, and other aspects of the share market and investment. Same is the case with an IPO or initial public offering, which we hear a lot. So let's find out what it is, how it works, and the possibilities of investments.
Initial Public Offering (IPO)
When a company issues its shares for the first time for the general investors, it's called an IPO or initial public offering. Limited companies issue this IPO so that it can be listed with the stock exchange to make easy for the investor to buy and sell shares in the share market. That's why buying of such shares is called an IPO investment.
How Does IPO work?
A company needs to submit related documents for issuing share through IPO to the SEBI for scrutinizing. After getting approval from the SEBI, it can plan the number of shares to issue and the price for each share. The company can either fix a price for the share before the issue, or call investors to bid for the shares by offering a range of prices. When the IPO issue type is decided, the shares are made available to the public, by inviting applications to buy shares.
Investing in IPO
Before making an IPO investment, it's necessary to read the prospectus carefully and understand the company's financial details, how it's going to use the money raised through the IPO, and the type of share. This will help you take the right decision. To buy the shares, you can either approach a broker, under-writer bank, or submit an application online on the company website.