IPO (Initial Public Offering) involves the process of offering shares of a private company to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors for a variety of reasons providing liquidity to investors and employees, raising capital to reinvest and grow business, maximizing shareholder value and using stock as a currency for mergers and acquisitions. The transition from a private to a public company can be an important time for private investors to fully realize gains from their investment as it typically includes share premiums for current private investors. Meanwhile, it also allows public investors to participate in the offering. Once you open an account at Magnates you are given the opportunity to pursue investing in a competing the market once it goes public.
- An IPO is like a negotiated transaction, the seller chooses when to come public, and it's unlikely to be a time that's favorable to you
How To Take Your IPO Position
Inform about how IPOs work
Discover and choose upcoming IPOs
Select the most suitable account and complete registration
Create your IPO strategy
Open your first position
You can invest speculating in a company’s market cap before it lists on a stock exchange
You can invest speculating on a share price
How does the IPO process work?
The Initial Public Offering IPO Process is where a previously unlisted company sells new or existing securities and offers them to the public for the first time for different reasons, depending on their circumstances…
After that the business then has to prepare a registration statement to file with the appropriate exchange commission. If the application is approved, the company will enlist the help of an underwriter to help it decide how many shares to issue and at which price.
Underwriters are mostly banks, and it’s their job to start a book building process, searching for investors to subscribe to the IPO. Other institutional and retail investors can purchase the stock in the public market.
Primary vs Secondary Market
Primary Market is the financial market where new securities are issued and become available for trading by individuals and institutions for the first time. A company offers securities to the general public to raise funds to finance its long-term goals. In the primary market, securities are directly issued by companies to investors. Securities are issued either by an Initial Public Offer (IPO) or a Further Public Offer (FPO).
Secondary Market commonly referred as the “stock market” is one in which investors trade existing shares of a company. This is in contrast to primary markets, where companies sell shares directly to investors, as in an IPO. The defining characteristic of the secondary market is that investors trade among themselves (investors trade previously issued securities without the issuing companies’ involvement).