What Is IPO? Initial Public Offering
IPO full form is Initial Public Offering. Initial public offering is the process by which a private company can go public by sale of its stocks to general public. It could be a new, young company or an old company which decides to be listed on an exchange and hence goes public.
Companies can raise equity capital with the help of an IPO by issuing new shares to the public or the existing shareholders can sell their shares to the public without raising any fresh capital.
#How to Work IPO (Initial Public Offering)
The company which offers its shares, known as an ‘issuer’, does so with the help of investment banks. After IPO, the company’s shares are traded in an open market. Those shares can be further sold by investors through secondary market trading.
Getting out of a hot IPO is very difficult. To understand how an IPO is done, let’s understand the process of Underwriting.
- Underwriting is the process of raising money by either debt or equity, but in case of an it is by equity). Underwriters act as the middlemen between companies and the investing public. Some examples of biggest underwriters are Goldman Sachs, Credit Suisse, JP Morgan, and Morgan Stanley.
- When a company decides to go public, the first thing it does is to hire an investment bank. A company can sell its shares on its own, but realistically, an investment bank is required as it acts as an intermediary during the whole process.
- The investment bank and the company will first meet to negotiate the deal. Items usually discussed in such meetings are –
- The amount of money a company will raise,
- Type of securities to be issued
- Details of the underwriting agreement.
- The deal can be designed in a variety of ways. In some deals the underwriter guarantees that the amount will be raised by buying the entire offer and then reselling to the public. But in some of the deals the underwriter offers to sell securities for the company but does not guarantee the amount raised.
- A cooling off period is required by the SEC. During this period the SEC investigates and makes sure that all the material information has been disclosed.
- Once the SEC approves the offering, an effective date is set, as to when the stock will be offered to the public.
- On the other hand, during the cooling off period the underwriter puts together the red herring. The red herring is an initial prospectus containing all the information about the company. But it does not contain any information on the offer price and the effective date (which aren’t known at that time).
- Once the red herring is in hand, the underwriter and company starts to hype and build up interest for the issue. They bring the road show where the big institutional investors are courted.
- As the effective date approaches, the underwriter and company start deciding on the price. This decision depends upon the company, the success of the road show and, and current market conditions.
Upcoming IPO 2020
The Company has fixed the price band 135-145 per share for the IPO. Under this 3,05,99,017 shares will be offered for sale.
Nowdays market will be buzzing again. Now 3 companies have brought their IPO. These Include the IPO”s of UTI AMC, Mazagaon Dock Ship builders and Likhaita Infrastructure. All three issues can be invested. If you also want to take advantage of the IPO market then every details must be known before investing.
- UTI AMC
- Mazgaon Dock Ship builders
- Likhaita Infrastructure
More IPO Click Here
Mazagaon Dock Ship builders
Public sector defense company Mazagaon Dock Ship builders can be invested in the IPO on October 1. The company has fixed the price band 135-145 per share. Under the IPO 3,05,99,017 shares will be offered for sale. The target is to raise 444 crore from the IPO at the upper level of the company will be listed in BSE (Bombay Stock Exchange) and NSE (National Stock Exchange). Yes securities, Axis Capitals, Edelweiss Financial, IDFC Securities and JM Financial will manage.
Should You invest in IPO
Anil Singhvi, managing editor of zee Business, is quite bullish on the Mazagaon Dock. According to Anil Singhvi, the money has to be invested in the IPO of Mazagaon Dock. There is no question of thinking. After a long time, such a company, balance sheet, such business has come, which you may fall in love with by seeing or reading. It was fun to read the company’s note that such a good company in entering the market. Money is double on listing. You have to invest money for a single lot ( 103 shares) in the best company, best valuations, retail category.
Mazagaon Dock is at Dominant Position in its area. Are undervalued in terms of valuation. The Business of the company is good and it is showing good growth. In term of investing, money can be applied for listing gains in Mazagaon.
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