What is an IPO or Initial Public Offering?
Aarav last edited by ftForumMod
@harleen As a retail investor, choosing an IPO seems to be a difficult task especially for me. Company raises funds through an IPO. But, it's not easy to select the best IPO. I have heard that one needs to be cautious while putting money in IPOs. Is it true and to what extent? Not every IPO is a good choice. So, how to decide which IPO to subscribe? If an IPO is oversubscribed on day 1 does that mean its doing fairly good? I have very less idea on IPOs, mentioned what info I have gathered from friends. Can anyone guide in this.
vikas_nair last edited by ftForumMod
An IPO or an Initial Public Offering is when a company decided to go public. Basically a company issues its shares to the public through an IPO. Through the shares that are made public, the company earns the capital investment, which is utilized by the company for its functioning.
There are a number of reasons as to why a company goes public. The reasons could be to raise capital for growth, increase public awareness, allowing early investors to sell their stake to earn money, etc.
Once an IPO issue has happened, investors therefore have the opportunity to earn a share in the company.
Ishu last edited by
A good way is to go through the Company's Red Herring prospectus. You can get a brief idea about its business plan and objectives of issuing an IPO.
Going through its financial statements and analysing them might not be possible for common man. But, you can have a quick review of debts, whether the IPO is to repay debts? Check for Company revenues, profits etc. Most important, at what price the shares are being offered? Price Earning or PE ratio is a good indicator.
Josh last edited by
@ishu Nice explanation Yes, Prospectus contains ample amount of information about the company's financial details. Primarily, as a retail investor, we can know the objective of issuing IPO. Why the company has issued this IPO? PE ratio and Return on equity are few techniques used to judge the valuation and position.
Amol Garg last edited by
@harleen I really get confused which IPO to go for? I am not from a financial background so analysing the company financial details seems a bit difficult. Yes, but I can understand the basics by reading the prospectus. Is there an easy way to know which IPO to invest? Any feedback on it.
A Former User last edited by
Thank you for sharing such interesting facts and the precautions to be taken by the investors with an Initial Public Offering (IPO).Retail investors might find it difficult to invest with the IPO.Because they have the thinking that the company is going public due to the lack of funds and it is a risk to invest in it now.
Gaurang Behl last edited by
@harleen I like direct investing in stocks. I know that's risky. But, I invest only the excess amount I have. I haven't opted the IPO route.
Harleen last edited by
Hi, Yes direct stock market investing and trading suits investors willing to take some risk. You can see huge fluctuations in stock prices owing to different factors. So, one need to be very cautious before stepping into the stock market. If you are not satisfied and wish to play safe only, then better look for risk free investment options.
LandPel last edited by ftForumMod
I believe that an IPO is the best way to protect the company in terms of financial aspect. What do you think guys? Have you ever invested in an IPO? An IPO is suitable to investors who are willing to take some risk.
Mahima last edited by
@Harleen There are so many IPOs. I am interested in investing in them. But, I usually get confused searching information. So, avoid putting money in them. Nice to have useful general information about IPOs here.
Akshay Kumar last edited by
@Harleen Is there any upcoming IPO to consider? I am keen of investing in IPOs. So, keep looking for good ideas to invest in different IPOs in India. Any feedback on it.
ftForumMod last edited by
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Arvind T. last edited by
@Harleen In simplest terms, when a Private company goes Public i.e. it offers its shares to public for the first time. And, raises investment capital in return. So, basically the owners of the company give apart of their ownership to the shareholders. Right!
Sandra last edited by ftForumMod
Initial Public Offering (IPO) also known as “going public” is a complex decision which calls for appropriate planning and careful consideration.
It’s a process wherein a privately held company for the first time, issues its stock to the public. IPO is a dream for many small businesses as it transforms a private company into a public entity thereby helping the company get exposure and improved credibility.
IPO financing is crucial when a private company seeks to take its business to the next level. With IPO financing, the company becomes a part of the stock market whose shares are made available to the general public for investment.
Therefore, a significant reason why people opt for IPO financing is for growth and expansion. However, founders or venture capitalists may always influence this decision if they are eager to cash out on their investment.