MoneyMunch

What is IPO & how to use?

Initial Public Offer (IPO) is when an private company can be registered on the stock market with its securities in the prime market.

A primary market is one that issues new securities on an exchange. The primary markets are where investors can get first crack at a new security issuance. The issuing company offers its even handedness to investors or groups and receives cash proceeds from the sales, which is then used to stock processes or expand the business. It is the largest cause of funds with long or unlimited development for the company.

The purpose of an IPO may be related to the activities of the company or create new projects or other object that would be identified by the Company in its offer document, or just to get its existing equity shares listed by reducing the stake of existing equity of investors through their offers. This Initial Public Offering can be made by the static price system and book building . Sometimes ,it can be made through the combination of both. In that case, the issuer chooses to issue securities through the book building route, then as per SEBI guidelines.

Best uses of IPOs are sponsoring the growth of business or service volume or advertising activities that have immediate effect on earnings; also, providing a company with increasing sales, as a layer of working capital to fund growing inventory or accounts receivable. IPO funds can be used to finance research and progress, but stock prices incline to decline during long periods of product development, which in turn produces a new set of challenges for organizers or senior management.