Once the IPO is complete, the company is listed on an exchange and trading of its stock can begin. The newly-listed stock is then available to be bought and sold by the public. Investors now have access to the company’s shares, allowing them to own part of a publicly traded entity.When investing, one can bid for shares within the given price range during the bidding process. This part is known as the Primary Market at the time of offering, and once those stocks are listed on a stock exchange and trading begins, it’s referred to as the secondary market.Once the stock transitions from primary to secondary markets, it gets traded daily on the stock exchange. People buy and sell these listed shares on a regular basis.In the following chapters, we will address a variety of questions around trading and stock prices, including why it is done and what influences its fluctuation.Few IPO Jargons: You need to be aware of a few terms when considering whether or not to invest in an IPO. It’s important to understand these words to make an informed decision.
Let’s say the company wants to offer 175,000 shares to the public, but during the book-building process, only 150,000 bids are received. That means it is under-subscribed, which isn’t favourable as it hints at negative sentiment from the public.
If there are double the quantity of bids than shares up for grabs, this is referred to as “oversubscription”, and in such a case, the issue can be said to be two times (2x) oversubscribed.
The Green Shoe Option
It is a feature of the issue document that permits the issuer to distribute an extra amount of shares, typically 15 per cent, in case of oversubscription. It is also referred to as the over allotment option.
Fixed Price IPO
Companies sometimes opt not to use a price band and, instead, fix the price of the IPO. This is known as a fixed-price IPO.
Price Band and Cut off price
The price band for a stock is the range of listing prices. For instance, Rs.105 to Rs.110 is a possible band – if the issue is listed at Rs.125, this would be considered the cut-off point.
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Disclosures and Disclaimer: Investment in securities markets are subject to market risks; please read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Past performance is not indicative of future results. Details provided in the above newsletter are for educational purposes and should not be construed as investment advice by BP Equities Pvt. Ltd. Investors should consult their investment advisor before making any investment decision. BP Equities Pvt Ltd – SEBI Regn No: INZ000176539 (BSE/NSE), IN-DP-CDSL-183-2002 (CDSL), INH000000974 (Research Analyst), CIN: U45200MH1994PTC081564. Please ensure you carefully read the Risk Disclosure Document as prescribed by SEBI | ICF
Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020.
Update your mobile number & email Id with your stock broker/depository participant and receive OTP directly from depository on your email id and/or mobile number to create pledge.
Pay 20% upfront margin of the transaction value to trade in cash market segment.
Investors may please refer to the Exchange’s Frequently Asked Questions (FAQs) issued vide circular reference NSE/INSP/45191 dated July 31, 2020 and NSE/INSP/45534 dated August 31, 2020 and other guidelines issued from time to time in this regard.
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