Initial Public Offer (IPO) is the method by which a company first enters the share market. The company invites the general public to invest in the shares of the company using a document called a Prospectus. This prospectus has the information about the issue (no. of shares, price per share, how to apply, etc), information about the history of the company, financials, future strategies and so on.
Often in an IPO the issue closes on the same day it opens. How does that happen?
Although there is a day to open the subscription list, you can start applying from the day the Company makes available the Prospectuses to the market. With high investor demand it is very common for IPOs to get oversubscribed. By investing early you can make sure you don't miss out on the chance of applying for a good stock.
What is a Prospectus? From where can I get a Prospectus?
Prospectus gives out the details of the company, details about the shares to be issued, industry information, procedure in applying for shares and so on.
You can get the Prospectus from your broker and also from the respective company. Go through it to see whether you like the company and if you are interested you can fill in the application form and submit it to your broker or to any address specified in the Prospectus along with the required remittance. You should carefully go through the procedure to be followed in applying for shares to make sure your application does not get rejected.
I never get allotted the total number of shares I apply for in an IPO. Why is this?
As a result of the increased investor confidence in the share market, companies going for IPOs get oversubscribed. That is, the company gets applications for more than the number of shares they are issuing. As such the companies have to decide on a ratio or a method to allot shares to all the people who invest in a fair manner. Because of this you will not get the total number of share you apply for. The basis of allotment will be published by the company on the CSE website once it is decided upon.
Can I apply for shares jointly with another person?
Yes, you can.
You can apply jointly with a maximum of two (2) other applicants (your spouse or children above 18 years of age). As such a maximum of three (3) applicants will be accepted as joint holders. You should fill in information for all applicants in the spaces provided in the application form.
What is an 'Introduction'? Can I buy shares from an Introduction?
Introduction is different from an IPO although it is another method of entering the share market. Here the already issued shares of the company would be listed on the stock exchange. You cannot buy shares because shares are not offered to the public. But the company will issue an Introductory Document which you can obtain from your broker and if you are interested in the company you can buy shares in the secondary market.
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