FAQ ON IPOs

[Sandeep]

Hi everyone,

I am a newbie in Shares trading. I am trying to learn - how to invest in shares and MFs? Can you please tell me how can I apply for an IPO?

thanks in advance
Sandeep

[>take]

How can I apply for an IPO?

You can use online or offline both mode to apply for an IPO. In online you directly go to the IPO section and apply. In offline, you have to take IPO application from the agent/ broker and fill it with your details and demat account and submit the form with cheque to designated banks. And take the deposit slip.

Happy Investing!

[Sandeep]

Thanks >take. I have one more query - What is bookbuilding method in IPO? How shares are alloted under this method?

Thanks again!
Sandeep

[>take]

I have one more query - What is bookbuilding method in IPO? How shares are alloted under this method?

Book building is the process of price discovery. During the fixed period of time for which the subscription is open, the book runner collects bids from investors at various prices, between the floor price and the cap price. Bids can be revised by the bidder before the book closes. The process aims at tapping both wholesale and retail investors. The final issue price is not determined until the end of the process when the book has closed. After the close of the book building period, the book runner evaluates the collected bids on the basis of certain evaluation criteria and sets the final issue price.

Source - Wikipedia.org

[Tushar]

What is listing gain? (I have read about this in some forum and people talk about listing gain with IPO.)

[smartcat]

What is Greenshoe option in IPO?

[rohit]

What is Greenshoe option in IPO?

A provision contained in an underwriting agreement that gives the underwriter the right to sell investors more shares than originally planned by the issuer. This would normally be done if the demand for a security issue proves higher than expected. Legally referred to as an over-allotment option.
Source - investopedia.com

[rohit]

What is listing gain? (I have read about this in some forum and people talk about listing gain with IPO.)

IPO are generally priced at a discount, which means that if the intrinsic value of a share is perceived to be Rs.100 the shares will be offered at a price, which is lesser than Rs.100 say Rs.80 during the IPO. When the stock actually lists in the market it will list closer to Rs.100. The difference between the two prices is known as Listing Gains, which an investor makes when investing in an IPO and making money at the listing of the IPO.

[Vijay_Kumar]

What is the bookbuilding Method in IPOs? Please explain in layman terms.

[VarunD]

What is the bookbuilding Method in IPOs? Please explain in layman terms.

As per Book building method, the IPO issuing company doesn't fix the price in advance, rather gives a price band to the investors within which they are entitled to bid. The investors, in turn, bid for the same by stating the quantity as well as the price of the IPO shares at which they are interested to purchase. IPO's final price is then determined on the basis of all the bid prices.