You hear about IPOs everywhere—but what actually happens when a company launches one?
IPO = Initial Public Offering.
It is the process through which a company offers shares to the public and becomes listed on a stock exchange. An IPO can involve a fresh issue of shares, an offer for sale (OFS), or a combination of both.
Here’s the step by step process:
1. The company decides to go public
It may want to raise capital for growth, expansion, debt repayment or other purposes.
2. It prepares its offer document
The company provides investors with information about its business, financials, risks and the proposed issue.
3. Investors place bids
In a book-built IPO, investors generally bid within a specified price band. The bidding process helps determine the final issue price.
4. Shares are allotted
If the IPO is oversubscribed, you may receive fewer shares than you applied for—or none.
5. The shares are listed
After the IPO process is completed, the company’s shares begin trading on the stock exchange.
But here’s the important part:
A popular IPO isn’t automatically a good investment.
Before considering an IPO, understand the business, financial performance, valuation, use of IPO proceeds, promoters, competitive position and risks.
Educational and informational content only. Not investment advice.
