Most companies bring in IPOs to raise capital. Whether selling a government stake or a bank or a company is going for an IPO, there is a purpose to collect money behind everyone.
While reviewing the IPO, it is important to know why the company wants to raise capital. The company can only issue to capitalize on the strength of the market. It would be better for investors to stay away from such IPOs. But, if the company is collecting money for expansion plans or for starting new units, then investors can invest in the company s issue.
What is the difference between public offering and IPO?
An IPO means an initial public offer, in which the company is selling stake for the first time. The issue of companies which are already listed, is called public offering.
What is the difference between a fixed price IPO and a book built issue?
In the book build IPO, the price band is fixed for the issue and applications are called for from the investors. The price at which the company receives the highest number of applications for IPO is fixed at that price.
The share price is fixed in advance in the fixed price issue. Investors have to decide whether they want to invest money or not.
In 1997, Hue Software first launched the book built IPO. Later, all the companies are liking the book built issue. It has been observed that the fixed price IPO of banks has received good response. Fixed price issue is a good option to attract retail investors. But, if the company wants institutional investors to invest in the issue, then the book built issue is better
Is book built a good way to fix share price?
It is better for the company to fix the share price with book built. However, retail investors may incur losses. Most retail investors apply at a cut-off price. Meaning, shares will be given at a price fixed by the company. In such a situation, investors may have to pay a higher price than anticipated for the stock.
At the same time, in the fixed price issue, the investor is already aware of the price. On the basis of which investors can decide.
How to decide whether to invest in IPO?
Before investing in an IPO, it is necessary to examine the performance of the company and the sector in the last few years. Do not judge from the data released by the company. See how the company has performed compared to other companies.