INTRODUCTION

Explore the fundamentals of the IPO market and participation technologies

What is an IPO?

An IPO stands for Initial Public Offering. It represents a private company’s first offer to sell its shares to the general public. This event is also called a ‘stock market flotation’. It represents the point at which the company becomes publicly listed on a recognized stock exchange, such as NASDAQ or NYSE.

IPOs typically involve private companies offering their shares for sale to new investors and for those shares to be freely tradable on a stock exchange. The offer can either be to the general public and/or institutional investors such as pension funds. A company can issue new shares to raise new money or existing investors in the privately-owned business offer their shares for sale.

When the general public participate in IPOs they are essentially buying shares before they hit the stock market.

Why are IPOs popular?

Many investors are interested in IPOs as they provide a chance to back a company which is likely to be going through a new stage in its life.

This might be a small pharmaceutical business that issues new shares to raise cash to fund drug development work. You might see an engineering firm use a stock market listing so that it can pay in shares to buy a rival business. Or, for example, it could be a natural resources firm which needs one final slug of cash in order to complete exploration work and start to build a mine

There can sometimes be an expectation that IPOs are priced at 50% below the true value of the business, so buying an IPO could see you make a quick return on investment once normal trading begins in the shares and their price adjusts to the ‘proper’ value.

The power is often in the fund managers’ hands when it comes to agreeing upon the starting price for the IPO as they are the ones who will inevitably be investing the most amount of money at flotation. These institutional investors will fight hard to get a discount on the proper valuation.

However, you must never assume that all IPOs will jump by 50% immediately upon listing. Investors must always consider the merits of a company before parting with any cash to buy shares. There is no guarantee the shares will rise and there’s a risk they could fall if existing shareholders use the stock market listing to feed their stock onto the market and gradually exit.

How to get involved?

Once a company decides to float on the stock market, one of two events happens. They either restrict the IPO offer to institutional investors or they open up the event to the broader public.

Offer period

The offer period can last between a few weeks and a month, giving you time to study the documentation and place an order if you like the look of the company.

The company may not have a firm price at this stage, so you will need to state how much money you are prepared to invest. All interested investors will be asked to confirm they have read and understood the information contained in the prospectus before investing, particularly the key risks highlighted by the company.

Share allocation

The IPO price tends to be published within two days of the offer closing. There’s a chance you won’t get the full desired allocation of shares if the offer is oversubscribed.

Log in to your account and you will see details of the upcoming IPOs that are open to private investors.

IPO GLOSSARY

Learn basic terminology to understand what the documents and the service are about

Allocation

The number of shares distributed to an investor.

Conditional dealing

Where shares are traded before the admission to trading date, as the name implies these trades are ‘conditional’ on the company being listed and can only settle once trading has become unconditional; i.e. everyone can buy and sell them.

Effective Date

The date on which an Offering is cleared by the SEC. The price and shares to be sold are set.The stock will trade when the market is open.

Issue price

The price at which the shares will be sold, also known as the offer price, before general trading begins.

Intention to float

The company’s first announcement on its plans to join the stock market.

IPO

Initial public offering.

Offer

When a company sells shares to the general public it has to make the formal offer in the form of a prospectus.

Offer price

The price at which the shares will be sold, also known as the issue price.

Offer price range

Range at the time of publication of prospectus within which offer price is expected to be set.

Offer size

The number of shares to be sold under the offer.

Price Range

An estimated range, within which an Offering is expected to be priced. This range can change during the Registration Period and is only a guide. A final price will be chosen on the Effective Date.

Prospectus

The definitive document outlining the offer in full.

Quiet Period

In terms of an IPO, the period where an issuer is subject to a SEC ban on promotional publicity. The quiet period usually lasts either 40 or 90 days from the IPO.

Registration Period

The process by which a company files required documents with the Securities and Exchange Commission detailing the particulars of a proposed Public Offering. A company issuing shares must reveal essential facts and detailed information about its business during the registration process, including a business and asset description, a description of the security being offered and the details of that offering, a description and names of the company’s management, and the company’s financial statements, which have been certified by an accountant working independently of the company.

Scaled back

When all investors’ applications cannot be satisfied by the amount of stock available they may be scaled back by a proportionate amount.

Supplementary Prospectus

A document only issued in the event of a significant change in the terms of the original Prospectus.

Unconditional dealing

When a company is officially listed on the stock exchange and normal exchange trading takes place

Underwriter

An investment bank that works with the Issuer to take it public.

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An IPO is the first public sale of shares of a private company on the stock market. Going to the IPO, the company for the first time offers to buy its securities to everyone. The IPO LIMITED team set itself the task of making it possible to invest in an IPO for everyone. even those who can afford to invest only $ 10. We simplified the entry process as much as possible, lowered the entry threshold, making it possible to remain anonymous in such transactions, and also take a commission only from those who withdraw money from the IPO LIMITED platform. The IPO LIMITED team has been investing in IPOs since 2016. you can look at the reviews about IPO LIMITED on a special page. IPO LIMITED is a company that will help you invest in an IPO with maximum security. In addition, IPO LIMITED provides advice and analytics for our users. We are always happy to help in investing in an IPO.

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