An Initial Public Offering (IPO) marks the pivotal moment when private companies transition into publicly traded entities by selling shares to the public, thereby raising equity capital from investors. This transformative process not only elevates a company’s status to that of a public entity but also presents an opportunity for astute investors to potentially reap significant returns on their investments.
Types of IPO
Fixed Price offering
A Fixed Price IPO involves companies setting a predetermined price for the initial sale of their shares. Investors are informed of the stock price set by the company before the offering commences. The demand for these shares becomes apparent once the offering concludes. Investors participating in this type of IPO are required to pay the full price of the shares upon application.
Book Building offering
In a Book Building IPO, the issuing company offers a price band, within which investors can bid on the shares. Interested investors submit bids specifying the number of shares they wish to purchase and the price they are willing to pay per share.
