Stock market 101: The ins and outs of an IPO

Julie Brownlee, Fsp Invest, 25 Nov. 2014

Tags: ipo, ipos, initial public offering, stock market, what is an ipo, listing on the stock market

Chances are you’ve heard the term IPO bandied about when it comes to companies and the stock market.

So what does IPO actually mean? And how do IPOs work?

Let’s take a closer look…

What is an IPO?

IPO stands for initial public offering. If a company decides to list on the stock market, an IPO is the way to achieve that.

IPO’s are complicated and lengthy processes. If a company decides to list on the Johannesburg Stock Exchange, it needs to comply with a whole host of listing requirements that the stock exchange dictates.

Once a company decides to list on the stock market and embarks on an IPO, it usually does so with the help of a large financial institution. In most cases, this institution will underwrite the IPO for the company.

What this means is if the company doesn’t sell a certain amount of its shares at its IPO, the financial institution will buy them.

How an IPO works

The first thing a company needs to work out is how many shares it’s going to issue. This involves deciding how much of the company it’s willing to put up for sale.

Then with its associated financial institution, the company will decide how much to sell its shares for.

With IPOs, they’ll either be oversubscribed or undersubscribed.

Oversubscribed means the public is prepared to buy more shares than are available.

Undersubscribed means the public isn’t prepared to buy all the shares available and this is where the underwriter would step in and buy the remaining shares.

IPOs are one of the primary function of the stock exchange. There tends to be more IPOs when the market is doing well and less when the market is doing badly.

So there you have it, the ins and outs of IPOs.

*********** Best seller *************


The profit-exploding investment brokers refuse to tell you about…

Capable of turning a mere R10,000 into R1,69 million!

You don’t have to be wealthy to profit from this investment.

You don’t need any special experience or skills.

And you don’t want to miss out on this opportunity!

Click here now and discover how to book double and triple-digit gains from the opportunity no one talks about.


Related QA

akossuth asked:
I am a new investor and about to embark on putting together my portfolio. I have an account with Easy Equities. Regarding your portfolio in your [read more]
Published at 13 Feb. 2018 in: Stock Market Share portfolio 1 Answer
oliviees asked:
Dear Gavin / Timon Regarding your cfd tip sent on 24 February 2017 for APN (Apsen), titled ‘Our broker’s top trade of the week’. I am [read more]
Published at 06 Apr. 2017 in: Stock Market Cfd 1 Answer
hjb777 asked:
Good afternoon, Please can you advise your recommendations (buy, sell and hold) on the following shares for 2017 (short [read more]
Published at 21 Feb. 2017 in: Stock Market Shares 2017 Short term 1 Answer
jacquesprinsloo77 asked:
Hi where can i get a detail table list on daily basis / live of all shares on jse + current volume traded + current /delaid price of share.? [read more]
Published at 08 Nov. 2016 in: Stock Market Helpdesk 2 answers
npadiachi70 asked:
my question for today is what advise can you give on trading binary options? is good or bad too rsiky or same as currency trading [read more]
Published at 12 Oct. 2016 in: Stock Market Online marketing 1 Answer

Related articles: