Can IPO bring you great profit

IPO stands for initial public offer is comes under the Primary market, where private companies (small or large), governments or public sector units can introduce their securities for the first time. It is also known as new issue market or NIM.

IPO is the best medium to raise funds for the introducer for anything like for expansion or for the betterment of the existing one or for any new and strong upcoming projects etc.

When a company decides to go to the public to raise fund then the next important thing to decide at what price structure (means the lowest and highest price range) the IPO should introduce for biding within a certain period of time, and this process comes under book building. The main criteria behind this is to gain money as much as possible.

The most important thing during bidding is the duration of days and the quote which can’t be less than the floor price, by the eligible participants according to the exchange list prepared by the book runner.

As today’s flexible share market can allow any corporate sector to issue IPO, so every day you will have some or other company’s IPO introduced in the primary market. So it is not that easy to choose the best IPO. It becomes more difficult as we have less information about that related company as this is new to the trading market.

There are also some other things about which one should careful before invest in IPOs, the price can change rapidly may be due to the insider holdings. The company can set a minimum period of holding the share for its inside share holders and after the expiration of  that holding period the urge to gain profit made the inside share holders to sell their shares and this increases the supply chain instantly means a huge number of shares is waiting for another holders and that leads a sudden fall in the share price.

So a thorough investigation and knowledge can convert your investment into a huge profit.