Entering the Stock Market could be scary, especially for someone who doesn’t know much about the market. Hence, it’s always advisable to study the market trends thoroughly before starting with your investment plans. However, if you’ve been reading about the Stock Market, you’ve surely come across the term IPO. Today, with this IPO guide for beginners, let’s get you accustomed to the world of IPOs.
What Is IPO And Who Can Invest In It?
IPO is the abbreviation for Initial Public Offering. As the name suggests, IPO is a process when a company issues their shares or stocks for the first time in the trading market.
When a company announces their IPO in the Share Market, it allows the general public to buy its shares and invest in the company. This means the company is moving from private ownership to public ownership. That’s why when a company announces their IPO, it is also known as a company going public.
Any individual with a demat account or trading account can make an IPO investment, provided they fulfil the eligibility criteria set by the specific IPO. However, one must do thorough research before investing in any IPOs.
Your IPO Guide To Make A Good Investment
Image source: drobotdean on Freepik
Image source: drobotdean on Freepik
To make sure that your IPO investment is a good step in your journey through the stock market, there are certain things you should consider doing before investing in any IPO. Here are some of the points you should always remember:
Company Study - Companies go public to raise money for various reasons such as expansion, research and development, paying off debts and more. You need to carefully study and analyse the company’s history, the intention behind going public, the current status of the company and future trends before making any investment.
Learn Market Trends - Try to do some research of your own and understand upcoming market trends. Try to gauge if there are any positive trends in the near future that will help the company and its IPO to grow.
Big Names ≠ Big Profits - Understand the fact that big company names don’t necessarily mean big profits. Nobody can tell you which is the best IPO to invest in just from a company’s name. Always do your research before making any investments and never go by the company name alone.
Track Application/Subscription Volume - When any good, profitable company goes public, there’s a high chance of over-subscription. So, not only do you need to submit your application on time, but you should also track the subscription volume to understand if you’ll be getting lesser shares or none at all because of over-subscription.
Not Always Profitable - Accept the fact that not all IPOs will earn you profits. If the company was overvalued or there was a miscalculation, you might end up losing all your money. So, carefully invest your money after thorough research.
Also Read: New IPO Disclosure Rules: Mind The Price Gap
How To Make An IPO Investment?
First, you need to have a trading account or a demat account. Then you must meet the eligibility criteria of your desired IPO. Then you can request shares from your broker. However, this doesn’t necessarily mean that you’ll get the shares as brokers usually have a set number of shares with them. Then you can go ahead and file an application to bid for an IPO. Once it goes through, you get your shares.
Key Terms Related To IPO In Share Market
Here’s a quick glossary for you to understand some IPO-related terms from the share market:
Issuer - A company that decides to issue its stocks to raise capital while going public.
Open/Close Date - The period during which an investor can bid for the issued shares.
Price Band - The price range in which the investors can bid.
Lot Size - Minimum number of shares that an investor has to mandatorily buy.
Allotment Date - The date when the allotment details of the issued shares will be announced on the website of the registrar of the IPO.
This article does not intend to pass on any financial advice and BQ Prime does not endorse any of the funds/schemes mentioned above. Please invest at your own discretion.
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