Summary- Should you subscribe or avoid in IPOs? For more information about the same, dive deep into this blog.
Amidst the rapid rise of stock markets, the Initial Public Offerings market has gained the spotlight again!
Coming to what it means, when a private firm offers its shares to the public to raise capital from investors, this process is known as IPO. The companies are termed as unicorns when they surpass a valuation of about $1 Billion. These are the companies that usually go for IPOs. Plus, corporations that are listed as profitable with strong fundamentals can also decide to go public.
A company decides to go public when it requires money for expansion, growth, clearing debt, and other general corporate reasons. Any new startup or organization does not multiply immediately after inception. Moreover, to become profitable, an establishment slowly grows over time. Success is never achieved in one day.
So, after reading about what exactly an IPO is, if you still think whether to subscribe to it or not, then before diving deep into this blog, let us first understand how it works.
Here is How It Works
To go public, the IPO needs an approval from the market regulator, SEBI. After the approval, the IPO details that include the launch date, lot size, IPO price band, and the amount of share sale for different types of investors like institutional, non-institutional, and qualified investors are all made publicly available.
After the IPO is launched, the investors have to subscribe to it within 2 to 3 days. Once subscribed, the individuals can check the allotment status released by the company after the deadline. When the shares are listed on the stock market on a scheduled date, the process is complete.
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Things to Remember for While Subscribing to IPOs
With the availability of advanced technology, individuals can subscribe to IPOs without leaving their own homes. Let’s take the example of Zomato. A whopping 3.2 million queued up for this food delivery company’s IPO.
Hence if you want to earn profit the right way through IPO, then take a look at the following points while investing in this,
- Research on the Past Records
Check the company’s past records before investing in its IPO. A firm should be financially strong. It should also be volatile. Research on its past records and check whether it is continuing to incur losses. If the company is incurring losses after losses over the past years, don’t invest in it.
- Rely on Credible Promoters
The promoters play an important part in IPO investing. You should always rely on a credible promoter. Ensure to conduct a thorough check-up on their qualification, experience, and criminal records. A credible promotor will have several years of experience with no fraud history.
- Learn How the Proceeds will be Utilized
You must check how the proceeds raised from the IPO will be utilized. If the company reveals that only debt will be repaid, then it’s not a feasible option to consider. On the contrary, if the organization decides to partly pay debt, and expand the business, then it clearly proves that funds will successfully flow into the business.
- Check for Possible Risks
Every business comes with risks. As a result, the company lists down all the possible risks that it could face after the issue. These are market risks, interest rate risk, foreign currency risk, credit risk, and other economic changes. Ensure to check for these risks and read them carefully.
While investing your time and trust in the stock market, don’t be pushed around by any misconception in your mind. Don’t let the biggest myths about the stock market coax you, and eventually hold you back from reaping the dividends of stock market investments.
Invest with Conscientiousness and Knowledge
Whenever an IPO is opened for subscription, companies are over-valued. So, if you decide to invest in IPOs, make sure to spend enough time understanding the company first. Everyone has to be prepared for the market risks along with earning profits. So, why wait when you can invest in them today!
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