A Brief Overview on Investing in an IPO

By Advisorymandi
6-August-2018 9:28:18 AM

Are you planning to invest in an IPO?


But, how much knowledge do you hold?

Well, if you still have doubts and still struggling with the IPO basics then you need to clear your doubts as soon as possible. Luckily, that’s why we’re here today so that we can give you a brief overview on investing in an IPO. But, before we go any further, let’s find out more on IPO.


What is an IPO?


An Initial Public Offering (IPO) is a dividing line which separates privately held companies from public ones.

Initial public offering or IPO is also known by the very first sale of shares by a company to the general public.

Or you can also say IPO is also referred to as going public.

Point is when a company which has never issued equity shares to the public before and issuing it for the first time by giving part of that ownership to stockholders is known as IPO.


Prior to IPO, a company is recognized as private with a small number of shareholders such as founders, family members, friends, and venture capitalists. But, when a company goes public, any individual who wasn’t involved in the company in its early days and investors who are interested to buy the shares of the company can participate. Prior to IPO, the public is unable to invest in the company but after, they can buy a portion of the company’s shares.


When a company goes public, it has to forfeit some benefits. Owners do not have to disclose much financial and accounting information of the company.  On top of that public companies have to follow some set of rules and regulations set by stock exchanges where their shares are listed. In good old days, it was so challenging to qualify for IPO but now with the increasing competition, the listing requirements have relaxed a bit.


Why go Public, then?


As you see earlier, there are many rules & regulations when going public but none of them are enough for the benefits a company will get in going public. Simplest one is an opportunity to grow and expand at a decent rate. Although privately held companies also grow and have many options to raise capital such as borrowing money, being acquired by other company, or seeking additional private investors etc. But, despite the largest sums of money can be acquired through going public. Alibaba, Facebook, and General Motors are the best examples to illustrate why to go public.


How to Invest in an IPO?


If you plan to invest in initial public offering then for starters, you need an IPO account. If you have it, then you are good to go!

Once you get the info on the date for an IPO and pricing details are out or finalized you can put in a checklist or mark your calendar as an important date because, on this day, the shares of the newly public company are available to purchase.


But, don’t be so confident because the prices announced ahead of the IPO is sometimes reserved for a limited group of investors – including employees and investors who meet the eligibility criteria.


IPO: Is there any Risk in Investing?


The one free stock market tip to all investors who are planning to invest in is to “understand the risks associated with it”. Because no investment is a sure thing – and IPOs are no different. So, a piece of advice, take the same approach to invest in the initial public offering (IPO) as would in any other stock.

The Get-rich-quickly opportunity of investing in find very appealing for investors but past flops taught us that any form of investing is not entirely risk-free. Thus, it would be best to take the same approach of investing in IPO as you would any stock in the stock market. It also means the same fundamental analysis and diversified portfolio.


Final Thoughts: –


You will find yourself lucky if you are getting in early on the latest IPO if it proves to be a success, but you will be cursing that same stock if it spoils your portfolio.

Thus, make no mistake while investing in the initial public offering (IPO). If you have any query or would like to add something up then don’t hesitate and comment in the section below. We will be happy to answer all your questions.


Note: All information & data provided in this article is for the educational purpose as well as to give general information on the finance & economy, not to provide any professional advice or service. Views & opinions are not biased against the company and do not affect any official policy or any other agency, an organization within the content.

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Author: Advisorymandi

AdvisoryMandi is India's most trusted Stock Market Advisory marketplace covers NSE, BSE, MCX & NCDEX. Invest with confidence and harness the power of AdvisoryMandi to make smarter investment decisions in Stocks, Indices, Commodities, Forex & IPO.

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3 Comments on "A Brief Overview on Investing in an IPO"

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1 year 9 months ago

Great post on investing in an IPO. Thanks for sharing useful info.

Sam Wilson
1 year 6 months ago

Don’t invest in an IPO just because it’s new to the market, you perceive it to be cheap or you believe you have some sort of “inside” information. Take the same approach to invest in IPOs as you would any other stock, and make sure you understand how to research stocks before buying. Thanks for sharing.

Ananthi Mathur
Ananthi Mathur
11 months 26 days ago

The brand-aroused interest from investors in the primary market which led to a crazy jump in the capital mobilized through Initial Public Offerings (IPOs). This led to a boom in IPO distribution financing as an increasing number of investors wanted to get their hands on the new market. IPO financing enables investors to leverage returns with the help of an NBFC.