What is an Initial Public Offering (IPO) ?

IPO full form in Share Market is Initial Public Offering. It happens when a private company decides to sell shares of its ownership to the public for the first time. This allows anyone, like regular people or other companies, to become part owners of that company by buying its shares.

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Initial Public Offering Process 

Companies do IPOs when they want to raise a lot of money to grow or improve their business. This usually happens when they’ve reached a point where they need more funds to expand, develop new products, or invest in their future plans.

How is an IPO Done?

To do an IPO, a company works with financial experts to prepare documents that explain their business, goals, and financial information. They also decide on a price for their shares. Then, these shares are made available to the public to buy on stock exchanges, which are like online markets for trading shares.

Future Impact of an Initial Public Offering?

After the Initial public offering, the company becomes “public,” and many people can own a piece of it. The company’s value might go up or down based on how well it does. If it’s successful, the share prices might increase, benefiting the initial investors. But if the company struggles, share prices might drop.

Now, In an IPO, there are two things happening. First, the company might create and sell new pieces of itself. When they sell these new pieces, all the money goes to the company. This money is used to help the company grow, try new things, or pay off any debts.

Second, some of the people who already own pieces of the company might decide to sell some of their own pieces to other people. The money from these sales goes to the people who owned the shares, not to the company.

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Let’s explain the initial public offering example:

This table captures the key information about Exhicon Events’ IPO, an event management company. including its dates, size, price per share, reasons for the IPO, and the fact that it was a fresh issue with no offer for sale.

When the IPO gets closed, majorly two factors are concluded:

• Oversubscribed IPO: This occurs when the demand for shares in an IPO exceeds the number of shares available for purchase. In other words, more investors want to buy shares than the company has offered. This often leads to a situation where the IPO is “oversubscribed”.
• On the other hand, an undersubscribed IPO happens when the number of shares investors want to buy is less than the number of shares the company has made available. This can be a sign of low investor confidence in the company or its offerings.

Also Read: What is the Market Cap of a company ?