What is ipo and how to earn money in ipo ?
IPO means the company is first time listed on the stock exchange.
IPO full form is initial public offreing. IPO means any company sold his shares for a public.Initial offering is typically underwritten one or more investment banks. IPO is also arrange for the share to be listed in one or more stock exchange.Through this process, a floating or going public colloquially known as a privately held company is converted into a public company.
IPO is can be used for raise a capital from many investors.The monetize of investments of private shareholders company founders or private equity investors, and enable easy trading of existing holdings or future capital raising by becoming publicly traded.
After the ipo the comapany is available for the trading in free float market.The comapny provide profit sharing through dividend in direct bank account for share holders for the company.Details of the proposed offering are disclosed to potential purchasers in the form of a lengthy document known as a prospectus. Most companies undertake IPO with the assistance of investment banking firm acting the capacity of underwriter. Underwriters provide several services and including help with correctly assessing the value of shares, establishing a public market for shares. Alternative methods such as the Dutch auction have also been explored and applied for several IPOs.
HISTORY OF IPO
The first time of IPO in Roamn Republic in 300 years ago. At that time no exchange available for trading. All the trader trader over the counter trade.The fiest IPO in USA is bank of america in 1783.
ADVANTAGES OF IPO
The main advantages of IPO for private company is the private company raise fund through public and use this fond for business expand and business operations.The company give his shares in ipo for fund.
Once comapny go for public through ipo investors and trader trade the share in stock exchange.The liquidity of shares in listed company very adavantages for company initial investors they exit any time in shares.The company is grow year on year the investors and trader trade the company shares price appreciation and this benifit also profitable for the company.The high price of share is profitable for company because the company thier pledge and raise money through bank loan and use this fund for the business growth.In a long time the profitable company share price is appreciate year on year and it is benifit for company because the company market cap increase day by day.The company is public through IPO the company Increasing exposure, prestige, and public image.The bank loan is public company is cheaper than private company.
DISADVANTAGES OF IPO
There are some disadvantages of IPO.
Transaction cost IPO in investment banker and some file cost in IPO.Once the company is Public the is requirement to disclose the financial and business information to public.IPO is under subcribed is very high risk for comapny becase the IPO is under subcribed in public the share price is low at the listing time and comapny image is defame at that time.
PROCEDURE OF IPO
In india the comapny is requirement approval in SEBI(securities and exchange board of india).