What is IPO Full Form?

The IPO full form is the Initial Public Offering. In the IPO process, private companies sell/offer their share to the public in order to raise equity capital from the investors. The IPO process transforms a private company into a public company. It is an opportunity for small investors to earn a good ROI (Return on Investment). Generally, companies initiate an IPO to infuse new equity capital into the firm, raise the capital amount for the future, facilitate easy trading of existing assets, and monetize the investments of the existing stakeholders. 

Also Read: MSc Investment Management 

What are the Types of IPO?

Given below are the types of IPO:

Fixed Price Offering – This refers to the issuing price that a company sets for the initial offering/selling of shares. The investors will get to know about the price of the stocks of that company and will make a decision. After the issue is closed, w can know about the demand of stocks in the market. If any investors wish to partake in this IPO, they must ensure that they pay in full for the price of shares when making an application. 

Book Building Offering – In this process, the company initiating an IPO offers a 20% price band of their stock for the investors. Then, the investors make a bid on the shares before the final price is decided. The investor will have to specify the number of shares they wish to buy and the amount they are willing to pay per share. The lowest price in the band is the floor price while the upper is the cap price. The final decision on the prices of shares is made based on the investors’ bid. 

Also Read: What is Portfolio Management? 

What are the Benefits of IPO?

Given below are the benefits of an IPO:

• Through an IPO, a company gains recognition and becomes more well-known than its private competitors. This also helps in attracting the attention of the media and the financial sector. 
• It provides access to more capital by going public. This will substantially increase the growth trajectory of a company.
• In IPO, shares are traded on an exchange amongst investors providing chances for investor diversity as no single investor will hold majority shares. 

Also Read: Stock Market in India

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