Updated: Aug 5, 2020
by Shikha Gautam
An initial public offering is a process by which a private company can go public by sale of its stocks to the general public. It could be a new, young company or an old company which decides to be listed on an exchange and hence goes public. Hence, an initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors. The transition from a private to a public company can be an important time for private investors to fully realize gains from their investment as it typically includes share premiums for current private investors. Meanwhile, it also allows public investors to participate in the offering.
The term initial public offering (IPO) has been a buzzword on Wall Street and among investors for decades. The Dutch are credited with conducting the first modern IPO by offering shares of the Dutch East India Company to the general public. Since then, IPOs have been used as a way for companies to raise capital from public investors through the issuance of public share ownership. Through the years, IPOs have been known for uptrend and downtrends in issuance. Individual sectors also experience uptrend and downtrends in issuance due to innovation and various other economic factors. Here are ways to apply for an IPO:
You can apply for an IPO through:
Online IPO Application or
Offline IPO Application
Online IPO Application
To apply in IPO's online, an investor has to open a Demat account/trading account with the financial institution that provides this facility. Once the Demat & trading account is opened, one should follow the below steps to apply online.
Steps to apply in IPO Online:
1. First login in your trading account and select the IPO you wish to invest in.
2. Transfer funds from your bank account to your trading account.
3. Select the number of shares you want to apply for and the price at which you want to bid for (or use cut off option) and then press the submit button.
4. If you get the allotment, the shares will be credited to your Demat account. The remaining money will be credited to your bank account through ECS. The most convenient way to apply in an IPO online is using the 3-in-1 account (bank account, Demat account & trading account) offered by banks. The process of applying IPO's online is extremely convenient.
Offline IPO Application
You can apply in any public issue through your bank account. You have to fill the details such as your name, PAN number, Demat account number, bid quantity, bid price and other relevant details and submit the ASBA application form to the banking branch which has been designated to act as a Self Certified Syndicate Banks (SCSB) for providing ASBA services. After the submission of your application, the bank will upload the details of the application in the bidding platform. Ensure that you fill the correct details in the form, otherwise, your application may get rejected.
Tips to make good money through an IPO:
Carefully study the performance of the company before investing in its shares. Never trust anyone before researching the company yourself.
Seek a company with something new and exquisite to offer, as they have a good chance of generating more profit.
Try to invest in shares of a company with foreign collaborators. Foreign collaborators are quite good at predicting the performance of the company and its prospects.
Finally, study the basics of the stock market in detail if you're new to it. Learn how to invest and bid properly.
IPOs are great ways to make money, but only if you’re clever enough. So, keep improving yourself.