Initial Public Offerings (or IPOs) are formed when a private corporation begins to offer shares in a new stock issuance. Before the issuance, most companies have limited shareholders, including the founder, close relations and/or angel investors.
IPOs Exist in two forms – (i) fixed price and (ii) book building. The former refers to share prices that the company predetermines. Conversely, companies offer prospective buyers a range of prices for which shares can be bid in the case of the latter. IPOs have been in existence for over 4 centuries and have experienced highs and lows in their issuance.
IPOs attract a lot of media attention, some of which are purposefully generated by corporations to build a buzz around them. The volatility of their price changes, which can yield enormous sums of money, attracts many investors. IPOs can also face swings, and investors should be mindful of this. Before investing in an IPO, one's risk tolerance and financial conditions must be evaluated, as well as the prospectus of the firm in question.
Several individuals often consider investing in a minor’s name for a number of reasons. By starting early, you can teach a minor the importance of saving & how it has the potential to bring in capital when investments are made with regularity. Investments made in a minor’s name are more tax efficient. Funds accumulated until the child reaches maturity are considered wholly theirs and are not combined with their parents' income, which could be substantial and so result in greater taxes. Such investments are sometimes regarded as trusts for minors, which are intended solely for their future and are not touched early on.
To apply for an IPO under a minor's name, the minor must have access to an online demat account with a permanent account number (or PAN). Minors aren't always awarded PANs because they don't have their own sources of income, thus it's best if it's in their parents' name. Trading accounts are not permitted, although demat accounts are. For stockbrokers to access a minor's demat account, it must be linked to a parent or guardian's trading account. This account is then connected to the minor's bank account. Prior to showing interest in an IPO, KYC forms in the minor's and parent's names must be submitted, and the demat account must be operational.
1. To bid on an IPO, third-party applications supported by blocked amounts (ASBA) given by banks are ideal. When considering ASBA as a payment option, keep in mind that banks do not provide financial services to minors. Using their own ID, parents can gain access to a minor's account.
2. One of the five IPO applications per bank account allowed by public banks can be in the name of a minor. In the case of private banks, while applying for an IPO via net banking, the guardian's PAN number is preselected in place of the minor's.
3. When minors reach the age of 15, they can apply for an IPO using their guardian's PAN if they have a bank account that is completely theirs. Minors are not eligible for tax deductions, and any and all gains are subject to the same taxation as adult equity investments. Minors can close existing demat accounts and start new ones once they reach the age of majority. Otherwise, they can change it into a main account and use their information instead of their guardians'.