An Initial Public Offering or an IPO is offered when a company that is private provides shares to the public at large. Called an ‘Initial Public Offering’ because a private corporation offers shares to the public for the first time, investors get an opportunity to become shareholders in the said company. However, before a company can officially offer its shares publicly, the company in question has to fulfil particular conditions which have been set forth by SEBI or the Securities and Exchange Board of India.
Institutional and individual investors, who are of the belief that any company offering an IPO will grow, purchase shares of the company, in the hope of making good returns. The share volume that the company sells as well as the price these shares are sold determine the said company’s ‘new’ equity worth or value. When the company is a private company, shareholders are few, and these may include the founders of the company, and families of founders and some friends. It may also include individuals and entities that have invested in the company for it to start, like venture capitalists. Most companies wait it out till they are robust and steady before offering an IPO. When the company ‘goes public’, the shares that are owned by the initial investors are worth the same price at which they are publicly traded. Any upcoming IPO requires you to open a Demat account to trade in an IPO or invest in it.
Where IPO investments are concerned, these are conducted through a special process known as ASBA or Applications Supported by Blocked Amounts. Here, the amount that you wish to invest in an IPO (depending on how many shares you wish to purchase) is blocked in your account in your bank, but it is not debited from the account till the said shares are allotted to you. In order to apply for an IPO, you should ideally open a Demat account first. A Demat account holds your shares in electronic form. You can open a Demat account at a brokerage or a bank, but you must link this to your bank account. Here are the steps to open a Demat account if you wish to invest in any upcoming IPO:
To apply for an IPO, you can do so through a brokerage, and you will have to fill out an IPO application form. You can do this online through your brokerage conveniently. The form will have to be filled out with details requested, along with your Demat account ID number. After you do this, you will have to wait for shares offered by the IPO to be allotted to you. These will automatically be credited to your Demat account if allotment takes place. You can easily open a Demat account for free at Motilal Oswal and get to learn about the latest talked-about upcoming IPO by LIC.
Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account | Upcoming IPO | LIC IPO