What is an IPO?
An IPO or initial public offering is a process through which a company goes public by selling its stocks to the general public. The company could be either new or old, and through the IPO it gets listed on the stock exchange. A company raises equity capital through an IPO; after the IPO ends, its shares are traded in the open market.
These shares are further sold to you, the investor, through the secondary market. With SBICAP Securities Ltd., you can easily participate in the IPO market and buy IPO stocks.
Types of IPOs:
Book Building refers to the process wherein underwriters attempt to find out the price at which the IPO will be offered. Used for efficient price discovery, Book Building is a mechanism, wherein during the period for which the IPO is opened bids are collected from investors at various prices.
The offer price of the IPO is determined after the closing date of the bid. While the concept is new in India, it’s relatively old in developed nations.
In this type of IPO, the company going for IPO determines the price at which its shares will be offered to investors. In Fixed Price IPO, you, the investor, know the price of the share before it goes public.
Here, the demand from the market is known once the issue closes. To participate in the IPO, you need to pay the full price of the share while making an application.