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What Is An IPO : Full Form, Check IPO Allotment Status And Types

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The Full Form of IPO is an Initial Public Offering. When a privately owned company lists its shares on a stock exchange, it does so through an IPO. After the Company issues an IPO, the general public can buy the Company’s stocks. People’s interest in the stock market has increased a lot in recent times, especially in IPOs. This is because many people can earn more money from IPOs. Many companies have made headlines by making colossal share price gains on their initial public offerings. However, it would help if you understood that IPOs are very risky investments because it is uncertain at what price the Company’s shares will be listed on the stock exchange. We have written this blog to give complete information related to IPO. In this blog, we will discuss What Is IPO, IPO Full Form, How To Check IPO Allotment Status, and Types of IPO.

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What Is IPO

Initial public offering or IPO is the process of offering shares of a private corporation to the public in a new stock issuance. Any company must meet the exchanges’ requirements and the Securities and Exchange Commission (SEC) to issue its Initial Public Offering. IPO helps companies raise capital by offering shares through the primary market. Companies appoint investment banks to market, assess demand, and determine the IPO price, date of issue, and listing on the stock exchange.

IPO can also be considered an exit strategy for the Company’s founders and early investors to realize full benefits from their private investment. Through IPO, the founders and initial investors of the Company earn money by selling their shares. However, this is not the case with every Initial Public Offering because the funds raised through Initial Public Offering are used by some companies’ founders and initial investors for expenses like expansion of the Company or repaying the loan of the Company, etc.

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IPO Full Form

The full form of IPO in the stock market is an Initial Public Offering (IPO). By launching an IPO, the Company raises a large amount of capital. It is a way for the Company to overcome the need for more funds to achieve its business goals. Sometimes, the Company’s founders profit by selling their shares through Initial Public Offering.

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How To Check IPO Allotment Status

Step 1: Visit the IPO registrar’s website.

The registrar for an IPO is responsible for managing the Initial Public Offering process, including the allotment of shares. Visit the website of the registrar handling the Initial Public Offering you have applied for. This information is usually available in the IPO prospectus or on the stock exchange website where the IPO is listed.

Step 2: After this, find the IPO Allotment Section on the website. It may say “IPO Allotment Status,” “Check Allotment Status,” or something similar.

Step 3: Provide necessary details. You may have to provide information like your PAN (Permanent Account Number), application number, or DP (Depository Participant) ID to know whether you have been allotted the IPO.

Step 3: Submit the information. In this step, enter the required information correctly and submit.

Step 4: Check your allotment status. After submitting the required details, you will see the IPO allotment status on the website.

Note: There is some terminology related to Initial Public Offering which you must know. By knowing the meaning of these words, you will be able to understand Initial Public Offering Allotment Status properly.

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Allotted – If Allotted is written, it means that you have got the full allotment.

Partially-Allocated – This means fewer shares have been allotted than the number of shares you applied for. For example, only seven lots are allotted on the application for ten lots.

No Allotment – No Allotment means that you have not been allotted a single share. There can be many reasons for this, such as:

  1. Your application has not been selected in the draw or
  2. Is there some error in your PAN number, demat account number, or
  3. Your bid is below the issue price or
  4. You have made multiple applications using the same PAN.

In case of No-Allotment or Partial Allotment, your blocked amount will be unblocked/released on or before the expiry date of the UPI mandate as per the Initial Public Offering deadline. Please get in touch with your bank if funds are not unblocked/released after the mandate expiry date.

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Types of IPO

Generally, there are two types of IPOs: Fixed price Issues and book-building issues. It is simple and easy to understand the difference between these two IPOs.

1. Fixed Price Issue

In a Fixed Price Issue IPO, the Company sets a fixed price at which all its shares are offered to investors. The Company entrusts this work to a merchant banker. Merchant banker is a unit that evaluates the level of risk to the Company and tries to reduce it. Not only this, the merchant banker also finds out the total current value of the Company as well as its future prospectus.

In addition, merchant bankers also oversee the risk of all investments and how investors will be reimbursed for the risk. After all these studies and research, they determine the Company’s share price. In a Fixed Price Issue IPO, all investors know the share price fixed by the Company before the Company goes public.

2. Book Building Issue

In an Initial Public Offering with a book-building issue, the share price is stated during the Initial Public Offering process. The Company does not set any fixed price in this process, but there are two different price bands. The lowest price band is called the “floor price,” and the highest price band is called the “cap price.”

However, investors wishing to buy shares must place bids within a certain period before the Company sets the price. Such bids are made within the range of 20% or the price band prescribed by the Company. Also, the Company makes it clear how many shares it wants to sell to the investors. In this, the final price depends on the bids received by the Company from investors.

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How an Initial Public Offering Works

If a company has not listed itself on the stock exchange through an Initial Public Offering, it is considered private. In the case of a pre-IPO private company, the number of shareholders is much smaller, which may include initial investors such as the founder, family, and friends, as well as professional investors such as venture capitalists or angel investors.

However, when the company brings its Initial Public Offering, its stake gets divided into millions and crores of shares, which ordinary investors can buy easily. Initial Public Offering is a big step for any company; with this, the Company can raise a lot of money from the market. This allows the Company to grow and expand.

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