We normally hear a lot of new companies getting listed on markets and few of them sell like cupcakes and few stumps like a no ball! IPO’s of many companies were out and we did see few them faring extremely well and have been giving great returns. But, do you know exactly why an IPO is released and how do you gain access to it?
Why is an IPO released?
IPO is normally a way company extends out seeking investments from the general public, to expand its work, or gain some new project, or hold the cash in hand for expanding the business.
How is an IPO released?
IPO is normally laid out to gain some investors for a company and listing the company on market for the first time. This makes the company become a public listed company and makes most of the info available to the common public.
The IPO is primarily issued in the primary market and then the stock and shares of it are listed in the secondary market for investors to purchase and trade using the same.
The company fixes a price analysis and then the IPO is opened. The public can place orders with their trading account at the mentioned price. It will be allotted in lots, or in some fixed amount of stocks. After the listing, the secondary market will allow the remaining public to trade and buy for a positional trade.
Here are few things that you must do before you buy the stock in an IPO:
- Every company will be graded by a governing authority like SEBI in India, and few other credit agencies across the globe. You need to check the valuation of the IPO and its growth in the coming years. The grade to the company is given after analyzing the financial conditions, its market value in comparison to its peer companies.
- Make sure that you read the documents available on the company website, all about its business and the reason for getting listed. Check the prospectus, the risk factors of the company, about the shareholders, any acquisitions, and other details.
- Check for the lock-in period after the subscription happens. After an IPO is listed, lock-in period is a contract that nobody can sell the stock for a specified period. This period might range anywhere from 1 year to 3 years, or even in months.