What Is an IPO?


IPO full form is Initial Public Offer.

Once you entered in the world of the stock market, you must have heard about IPO.

Hundreds of IPOs hit in the market every year.

Although you are familiar with the term IPO still traders are not aware of what is IPO?

Let’s get a glance at IPO to clear all your doubts at the initial stage.

Everything you need to know about IPO

What is the meaning of IPO?

IPO means Initial Public Offer, which refers to a process where a small or large company become a publicly traded company.

In simple terms, shares of the company will be available to the public to purchase first time.

And the company shall be able to raise their capital for the further expansion of their business.

When an IPO launched by the company, invested money by the investor directly goes to the company.

What is the process of IPO?

A company has to follow a series of processes for issuing IPO and to become listed.

The process initiates from hiring an investment banker.

Investment banker leads the whole process, until the company gets listed in the stock exchange.

Also Read : Should you invest in an IPO?

Companies need to meet requirements by exchanges and the Securities and Exchange Commission (SEC) to hold an initial public offering.

Therefore, the company chooses its underwriters and decides the writing terms through an underwriting agreement.

Here again, the investment banker works out on the company’s financials to finalize the underwriting agreement.

Investment bankers also fix the price brand, analyze the market demand, and date of issue of IPO

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Once everything got finalized, they file the registration statement with the SEC.

SEC scrutinizes the disclosed information and documentation.

If SEC is satisfied, then it allows a date to announce the IPO.

What is the need to offer an IPO?

Offering IPO helps the company to raise money.

Every company needs money for its day to day operations, investing purpose, repayment of borrowings, etc.

So, to increase the liquidity and regular flow of a company’s work, an IPO helps to raise funds from the open market.

Although not every company can get listed in the stock exchange.

Only the companies having a good brand and reputation in the market opt for offering an IPO.

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