Decoding IPOs: An A-To-Z Guide To Understanding Initial Public Offerings And Their Jargons

New Delhi: An IPO, or Initial Public Offering, is a pinnacle point in the life of a startup when it goes public by offering its shares to the public for the first time. If you also face problem understanding the multiple jargons related to IPOs whenever you try to read or watch them. Let’s understand this crucial phenomenon in an interesting way. 

Here’s an A-to-Z guide about IPOs:

A – Allotment: The process of allocating shares to investors who participated in the IPO.

B – Book Building: A process in which the company and underwriters determine the IPO’s price range based on investor demand.

C – Company Prospectus: A legal document that provides details about the company’s business, financials, and risk factors for potential investors.

D – Due Diligence: The process of conducting thorough research and analysis of the company’s financials and operations before the IPO.

E – Exchange: The stock exchange where the company’s shares will be listed and traded after the IPO.

F – Final Offer Price: The price at which the shares are sold to the public during the IPO.

G – Green Shoe Option: Also known as the over-allotment option, it allows underwriters to issue additional shares if demand exceeds expectations.

H – Investment Bankers: Financial institutions that assist the company in underwriting, pricing, and marketing the IPO.

I – Investors: Individuals, institutions, or funds that purchase shares during the IPO.

J – Joint Bookrunners: Multiple investment banks that work together to manage the IPO process.

K – Know Your Customer (KYC): The process of verifying the identity of investors as part of the IPO subscription process.

L – Lock-Up Period: A period after the IPO during which company insiders and pre-IPO investors are restricted from selling their shares.

M – Market Capitalization: The total value of a company’s outstanding shares calculated by multiplying the share price by the number of shares.

N – New Issue Market: The primary market where companies issue new shares to the public through the process of an Initial Public Offering (IPO). It is also known as the primary market or the new offerings market.

O – Offer for Sale (OFS): A method of selling shares during an IPO where existing shareholders offer their shares for sale to the public.

P – Public Float: The number of shares available for trading by the public after the IPO.

Q – Quiet Period: A period after the IPO during which the company and its underwriters refrain from making public statements about the company’s prospects.

R – Roadshow: A series of presentations by the company’s management to potential investors to generate interest in the IPO.

S – Underwriters: Financial institutions that purchase shares from the company during the IPO and sell them to the public.

T – Ticker Symbol: The unique alphabetic identifier assigned to a company’s stock for trading on the stock exchange.

U – Underpricing: When the IPO’s final offer price is lower than the stock’s initial trading price, allowing for immediate gains for investors.

V – Volatility: The tendency of a newly listed stock to experience significant price fluctuations in the early days after the IPO.

W – Withholding Tax: Taxes that may be withheld on dividends paid to foreign investors.

X – eXempt Offer: In some jurisdictions, certain small IPOs or private placements may be exempt from specific regulatory requirements.

Y – Year: The duration after an IPO when the company’s financial performance is closely monitored by investors and analysts.

Z – Zero-Day Trading: The first day of trading for a newly listed stock after the IPO.