Initial Public Offering


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IPO gives a company fast access to public capital.For the investor, IPOs are attractive mainly because they are perceived to be undervalued. To make IPOs more attractive, many companies may offer their initial public offering at a low rate. View the presentation to know more about Intial Public Offerings

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Initial Public Offering

  1. 1. Initial Public Offering Demystifying Stocks
  2. 2. Initial Public Offering Introduction How do IPOs Work IPO Process Investing in IPOs Things to watch out for Myths related to IPOs
  3. 3. IPOs Investment Opportunities
  4. 4. IntroductionInvestment in stock market can be done in two ways:• Through the secondary market by investing in the stocks of the company which are already listed• Through the primary market by participating in an IPOWhen a company issues its shares to the general public for the first time, it is called aninitial public offering or IPO
  5. 5. How do IPOs Work •A company decides to take out an IPO, and fixes Step 2 •Whenever the applications are more the number of shares and •Investors then apply for than the offer, companies price, at which the offer shares of this company, make partial allotment to will be made to the public. and normally, most IPOs investors. get applications for more shares than the total offer. Step 1 Step 3People are keen to take the IPO route as the price at which an IPO is offered is commonlyperceived to be at a discount to its fair value. Due to this, when the stock gets listed, itsvalue may increase thereby making a quick buck for those who got in on the IPO.
  6. 6. IPO Process IPO Process Book building Combination Fixed price method method method In the fixed price In the book building In the combinationmethod, the price at method, the investors method, componentswhich the securities have to bid for shares of both the methods-are offered is fixed in within a price band fixed price & book advance. specified by the issuer building method are and the final price is considered. decided after observing the result of the bidding
  7. 7. Who invests in IPOs?• There can be two kinds of investors for IPOs. One is the long term investor who buys the stock of a company with a mindset of holding it for a long period of time to make profits.• The other kind is the short term investor who just buys into the IPO to sell during the initial few days or even hours of listing and make what are known as listing gains.
  8. 8. Myths related to IPOs• The general perception is that IPOs are a safe and guaranteed way of making money• If one steers clear of the smaller companies and invests only in IPOs of well-known companies, one will make guaranteed profits• There are always listing gains• In IPOs, securities are issued at a discount
  9. 9. Things to watch out for• History of the company• The operational history and pedigree of the promoters• Past performance of the company• Price at which the IPO is being issued• The P/E Multiple provides a good yardstick.• Compare the P/E prevailing in the industry to the one being demanded by the issuing company• Do not be fooled by over subscription figures which will make you think that IPOs are the easiest and surest way to make money
  10. 10. Things to watch out for Promoter Holdings Undervalued or not IPO grading Quality ofComparison with peers management Objective of raising funds
  11. 11. Benefits of IPOs For Companies For Investors Stocks and shares are a fast way to For the investor, IPOs are attractive raise capital for business expansion mainly because they are perceived to and growth. By becoming a publicly be undervalued. To make IPOs moretraded company, a business can take attractive, many companies may advantage of new, larger offer their initial public offering at a opportunities and can start working low rate. This encourages investors to towards incorporation and even buy IPOs as a profitable investment worldwide expansion or take their option. IPOs may be undervalued inbusiness to another level. IPO gives a some cases, which can help thecompany fast access to public capital. investor make a quick profit.
  12. 12. Thank You! • READ MORETwitter Website Facebook