Investment Tips: How to invest in IPOs

Investing in IPOs/ initial public offerings is a procedure under which private limited companies offer their shares and stocks to the general public for purchase. For investment in such ipos opening a Demat account is a must for the investor. This procedure of offering IPO is available for both the new and the old firms or corporates. 

Normally an IPO is issued to raise capital and equity from the general public. The same can be accomplished by allowing the same shares of existing shareholders instead of opting to raise the new capital. 

The need for capital in business provokes well-to-do companies to issue IPOs. Under this, the main aim of the companies is to raise capital through the procedure of offering their shares to the general mass of people. Popularly known as the invitation to the first public on the stock exchange it got its name IPO. By opting to buy such shares the investors allow the shareholder’s per cent ownership as per the value of the purchase shares.

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The procedure to invest involves a few steps

  • Step 1: As per the stock exchange market the securities and exchange board looks after the regulation of the procedure of this IPO cycle. Normally the big operates are companies issuing such shares through this process that has to be registered with the stock exchange board primarily.
  • Step 2: For accomplishing the purpose of issuing an IPO the corporate has to file the documentation with the board. The submitted documents are there analysed as per the specifications of SEBI and are approved only if the same authority is convinced with the genuinity.
  • Step 3: Till the evolution process of the application is accomplished the company prepares does perspective or benefits regarding the pending status of the approval at SEBI.
  • Step 4: As soon as the approval is assured by the board the firm or the company germs to the determination of the price of each share that is to be issued for sale. Under the condition, it is also mandatory to mention the total number of shares offered for the purpose.
  • Step 5: Then the corporate decides between the two variants of the respective share issue. Under this condition comes a fixed price IPO and the book building IPO. Both of these are important with every aspect of the issue of shares and are to be specified as per the requirements. The former type of IPO owns the pre-decisive rates of the shares offered for selling while the letter ensures arrange of rates and the bidding specification for the same.
  • Step 6: Once the shares are offered to the public for purchase the interested investors apply by filling out an application and then the subscriptions as per the applications are allotted.
  • Step 7: Now, finally the corporate house opts for listings shared in the market and issues the number of shares in the primary market. After that, it is automatically listed in the secondary market which is then open for daily business trading.

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