Thursday, 25 August 2011
About IPO(initial public offering)
An IPO (initial public offering) is a first and one-time only sale of publicly tradable stock shares in a company that has previously been owned privately. An IPO is also sometimes known as "going public." Technically, an IPO is the offering to sell but virtually all IPOs result in all the stock offered being sold. IPOs are generally managed by companies that specialize in handling IPOs and have experience in determining what the likely IPO offering price should be. If the IPO manager determines that the stock will not sell at an offering price that is acceptable to the company, the application for an IPO is usually withdrawn until a better time. As soon as all shares of an IPO have been sold, the stock is now tradable through stock exchanges or specialists that trade in the stock and the stock price may go up or down.
Why are IPOs so popular?
IPOs are quite popular with the general public across the world because they are perceived to make easy money for short term and long term investors alike.
Here is how it works:
A company decides to take out an IPO, and fixes the number of shares and price, at which the offer will be made to the public.
Investors then apply for shares of this company, and normally, most IPOs get applications for more shares than the total offer. So, it is common to see that a company which offers 100 shares to the public gets applications for 200 shares. Since, the applications are more than the offer, companies make partial allotment to investors, and you may just get 5 shares, and get your money back for the remaining 5.
People are keen on getting in on IPOs because the price at which the IPO is offered is commonly perceived to be at a discount to the fair value. Due to this, when the stock lists, it zooms up, and makes a quick buck for the people who got in on the IPO.
Why are IPOs so popular?
IPOs are quite popular with the general public across the world because they are perceived to make easy money for short term and long term investors alike.
Here is how it works:
A company decides to take out an IPO, and fixes the number of shares and price, at which the offer will be made to the public.
Investors then apply for shares of this company, and normally, most IPOs get applications for more shares than the total offer. So, it is common to see that a company which offers 100 shares to the public gets applications for 200 shares. Since, the applications are more than the offer, companies make partial allotment to investors, and you may just get 5 shares, and get your money back for the remaining 5.
People are keen on getting in on IPOs because the price at which the IPO is offered is commonly perceived to be at a discount to the fair value. Due to this, when the stock lists, it zooms up, and makes a quick buck for the people who got in on the IPO.
