What is IPO investment:
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The time when a private company first sells shares of stock to the public, this process is known as an initial public offering (IPO). In nativity, an IPO means that a company's ownership is metamorphosing from private ownership to public ownership. For that reason, the IPO process is sometimes also referred to as going public.
Startup companies or companies that have been in business for a long time can choose to go public through an IPO. Companies primarily issue an IPO to raise capital to pay off debts, fund growth initiatives, raise their public profile, or to diversify their holdings or initiate liquidity by selling all or a certain portion of their private shares as part of the IPO.
In an IPO, after a company decides to go public, it chooses an underwriter to help with the registration process of securities and distribution of the shares to the public. The lead underwriter then gathers up investment banks and brokers who assume the responsibility for selling shares of the IPO to financial institutions and individual investors.
If a person is considering investing in an IPO, it is also important to understand that all hyped up information may not be true to its core getting swept up in the hype that can surround a budding young company. Many companies have debuted with high expectations and promising potential, only to struggle and go out of business within a few years of their inception.
When you participate in an IPO, you agree to purchase shares of the stock at the offering price before it begins trading on the secondary market. This offering price is determined by the lead underwriter and the issuer based on a number of factors, including the indications of interest received from potential investors in the offering.
Opening a Demat account:
DEMAT Account is an account that helps in the holding of shares and securities in an electronic format be it online or in a mobile format. A DEMAT Account must hold all the investments of an individual from shares, ETFs, mutual funds, etc in one portal.
Earlier, opening a DEMAT account was a time-consuming process and lengthy process, but with time it is easy and hassle-free.
To open DEMAT account, you would need-
1. Identity proof
2. Address proof
3. Income proof
4. Signature on white paper
5. Bank proof
6. Photograph
Initial Public Offering or IPO refers to the first time when the stock of a private company is sold to the public. After an IPO, the company’s shares are listed on the stock exchange and are available for trading.
The main purpose of an IPO is to raise money. Companies who wish to expand their business, repay loans, fund general corporate purposes etc. raise funds by selling a portion of its equity stakes to the investors.
Some points to strategize IPO investment:
1. Get an idea of where your Funds are Invested. The important part of any investment is to know the details in detail and calculate the risks and gains that can come with the investment and then decide whether to invest or not.
2. Pay attention to Company’s Promoters and Management: the administration of a company and management can many times convey certain subtle details which help a person to decide and understand the investment. Before you invest in an IPO, do a thorough background check on the promoters and their experience with the company. Often IPOs act as an exit-window for promoters.
3. As in the case of any kind of investment research and comparison is a crucial part of the process and it must be done with diligence and concentration. Research helps the investor to deal with the various aspects and multitude of offerings that the investments offer.
4. Investing at a cut off price. If a person is a retail investor and wishes to increase the chance of getting shares allotted to his company, then the individual must start the bidding at a cut-off price. In this process, the application will be considered, irrespective of the final allotment price.
5. Before you invest in an IPO, compare the valuation of the IPO with the other available competitors in the market. This also helps in healthy comparison and proper decision making.
6. Planning an exit strategy and understanding one’s limitations is very important
7. The understanding of the lock in period is of crucial importance. This is an important part of your IPO investment strategy, especially for retail investors
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