How IPOs Are Allotted?

Before understanding what changes for a company after an IPO, first explore how IPOs are allowed:

• Book Building: To determine the possible demand for the shares, the underwriters take bids from interested investors. This step assists in arriving at the right price band for the IPO offering.
• Price Determination: When the bidding process is over, the company, in consultation with underwriters, arrives at an IPO price after an assessment of demand and market environment.
• Allotment Process: The shares are issued to the various investors, including Retail, sHNI, and bHNI. E.g., institutional investors are usually given a bigger piece, while retail investors are given a chance to be allocated some shares through a draw if the IPO is oversubscribed.
• Final Allotment: In accordance with the guidelines established by the SEBI, the IPO registrar makes the final allotment. Following the publication of the allotment status, investors can verify if they have been issued shares.
• Refunds & Credit: Investors will receive a refund for any excess application money if they do not obtain shares or receive fewer shares than they requested.

 

What is IPO Subscription?

IPO subscription refers to the procedure via which investors apply to buy shares of a business during its Initial Public Offering. It also shows the demand for an IPO.

• Subscription Levels: The level of subscription is a factor that reflects the level of interest and demand by investors. IPOs that attract demand more than the number of available shares are referred to as being oversubscribed.
• Types of Investors: The subscriptions in the IPO are divided into various categories, including Qualified Institutional Buyers (QIBs), Non-Institutional Investors (NIIs), and Retail Individual Investors (RIIs).
• Impact on Allotment: A high subscription normally results in a fixed quantity being issued to each subscriber, whereby small investors suffer because the shares are issued proportionally to their subscription.

 

Company Changes after IPO You Must Know

Once a company successfully goes public, it undergoes numerous changes that can alter its trajectory and operations.

 

1. Increased Capital and Growth Opportunities

The foremost advantage of going public is raising capital. The money raised through an IPO can be utilized for expansion, research, and development to redeem existing liabilities. It enables companies to capitalize on growth prospects that they could not afford earlier.

 

2. Enhanced Public Profile and Credibility

Public listing of companies is beneficial in the sense that it optimizes the company’s profile and credibility within the market. It often leads to enhanced exposure within the media, and thus, more customers and business partners are attracted. The transparency, which is needed to meet the demands of regulatory bodies, may also enhance the confidence of stakeholders.

 

3. Regulatory Compliance and Reporting Requirements

One of the most important changes is the growth of regulation’s intensity. Public firms are subject to higher compliance and reporting requirements. For example, listed companies have to prepare and file financial statements more frequently.

 

4. Changes in Ownership Structure

An IPO is a process that changes the ownership structure of a company. Owners and initial investors can sell out some part of their equity, which results in a dilution of ownership. As a consequence, the decision-making process may be altered since new actors, such as institutional investors, become important.

 

5. Liquidity for Shareholders

An IPO allows current investors to exit the investment, giving them the ability to sell their shares in the market. This liquidity is helpful for those who have stock options and also investors who were early investors and looking for gains. However, it also means that the company’s valuation is contingent on market conditions and investor perception.

 

Conclusion

A company going public brings about a lot of changes with both advantages and disadvantages. On the positive side, more capital and exposure can lead to growth and prosperity. On the negative side, compliance with the rules, shareholders’ expectations, and market fluctuations are a challenge.

Nonetheless, IPOs offer you access to high-return investment opportunities. So, open a free Demat account with Almondz Trade without paying any commission or AMC.