IPO Recently, more and more companies are entering the market. How to participate in an IPO and not be left behind?
Instructions for participation
There will be two posts, which include the following parts:
1. What is an IPO and why is it needed?
2. Stage IPO
3. How to participate in an IPO?
4.How to analyze a company in an IPO?
IPO - public offering of the company's shares on the stock exchange. Conditionally there was a company without shares (for example, OOO), then she issues shares, changes the organizational and legal form in the joint-stock company and becomes public during the IPO, offering promotions to everyone.
The main goal of the IPO is to raise funds from investors for development, because. IPO is one of the most profitable options to do it. Other options for raising funds are loans and bond issues..
Before entering the public market, the company needs to go through a number of difficult preparatory stages:
1. Analysis of the company for compliance with the criteria for publicity: org-structure, information transparency, corporate governance, maintaining the necessary reporting, etc..
Ī2. IPO preparation - selection of consultants (evaluate the company), brokers (through them the IPO takes place), Underwriters (in the absence of demand, the shares will be redeemed), negotiation of IPO parameters (number, price range, dates), preparation of documents.
3. An Investment Memorandum is being created (with a description of the company and IPO parameters) and a road-show is held (advertising campaign). It is at this stage that many will learn about the upcoming IPO..
4. The process of collecting applications from investors, pricing (determination of the final price), satisfaction of applications (allocation).
5. Actually, listing of shares and the beginning of their circulation.
so, did you find out, that a certain company goes public. But this is not enough yet, to decide on participation in the IPO. You must wait for at least 2 parameters: range of price and volume of placement. It is also advisable to know the assessment of the company's capitalization by brokers and analysts. This data is required when analyzing the fair price of shares, more on this in the next post in a week.
The procedure for participating in an IPO itself is extremely simple.. When a company announces an IPO and sets a stock price range, collection of applications from investors begins. You need to find the IPO section in your broker's application or in your personal account (also how do you find stocks). If you don't know where it is, then contact the broker and they will tell you for sure, where is it and what IPOs are currently available.
Next, you need to apply for participation, indicating only the amount. Amount, usually, debited from the account immediately. When buying shares on the stock exchange, as you know, you need to indicate the number and price of shares. In an IPO, the share price is determined based on demand. If the demand is small, then the final price will be lower and vice versa. Your application can be executed in full, partially or not at all - this is called allocation. If the demand is small, then the allocation will be high and vice versa.
After submitting the application, it remains only to wait for the results of the IPO. In any case, everything will happen automatically.: if everything is okay, then the application will be fully executed and shares will appear on the account. There can also be partial execution. for example, have applied for 10 thousand. rub., but only fulfilled 5 thousand. rub. In this case, shares and money for the corresponding amounts will appear on the account.. The request may not be executed at all, and then the money will come back to the account. This is happening, when the total demand of bids is more than shares, which the company planned to place on the exchange.
Applications are executed in turn - who first submitted the application, the one and the first in line. Who submitted at the last moment - the last ones in the queue for execution. Second orders may not be executed. You also need to remember, that some Brokers charge IPO fees, for example, at Tinkoff 2% from the amount of a successful bid. VTB does not have such commissions.
Sometimes there is a lock-up period after the IPO (Lock-Up) - period after IPO, during which investors cannot sell shares, bought at IPO. As a rule, it is 3-6 Months. More often, such a restriction is imposed on top managers., IPO organizers and retail investors are not relevant.
In fact, it is not difficult to participate in an IPO technically., than buy shares on the stock exchange. It is much more important and more difficult to correctly analyze the company, before taking part in his IPO. Analyzing a company before an IPO increases the chances of success, however, as in all other areas of investment and finance, does not give any guarantees. We will analyze in more detail the analysis of the company before the IPO in the next post., because. this post has already turned out to be quite voluminous and capacious.
