An IPO is therefore a significant event in a company’s cycle of corporate development which involves offering of its stock to the members of the public in an effort to raise equity capital. This change process does not only upgrade the status of a company to that of a public limited one but also afford investors, who can analyze it, extremely high returns on their investments.
Types of IPO
Fixed Price offering
Some of the categories of IPOs are; Fixed Price IPOs in which companies fix the prices at which it will sell its initial shares. Generally, the company announces the price at which it intends to offer the shares to the investors when the offering starts. This is evident through the realization of the demand in these shares as soon as the offering is over. Another feature of this type of IPO is that the participating investors are expected to make full payment of the shares on application.
Book Building offering
In a Book Building IPO, the issuing company comes up with a price range within which the buyers are supposed to submit their interest. Prospective investors declare their interests in an organization through offering their bids, with the number of shares in which the investor wants to invest and the price that the specific investor is willing to pay per share.
