The listing days of an IPO are crucial for an investor. After the IPO closes, the final prices are revealed, and the shares are listed in the IPO stock market.
So, let’s see the opening days and their regulations in this article.
What is an IPO?
A corporation must become a public limited company to raise cash from the general public. As a result, the firm enters the IPO stock market for the first time. One can become a part of that firm by purchasing shares in it.
Two Types of Issues
- Fixed Price Issue
When a corporation does an IPO in the capital markets, it sells equity shares to the general public. A fixed price issuance occurs when the corporation determines the price of the shares within that period.
- Book-Building Issue
When a firm conducts an IPO and provides equity shares with a price range, it is a book-building issue. When a corporation seeks a price range, it invites bidders to submit bids within the price range that they provide.
Opening Days for Different Issues
Opening days are a crucial factor for any IPO. The company receives the applications and decides on the cut-off price during this time. So let’s look at the limit of opening days for different issues.
- Fixed Price Issue
For a fixed issue, the limit of opening days is three to ten days. Therefore, it is usually three days that fixed issues remain open, but a company can extend the days up to ten days. This type of issue follows the guidelines of Clause 8.8.1 of SEBI.
2. Book-Building Issue
A book-building issue and its opening days differ from a fixed-price issue. According to SEBI regulations, bidding days for the book-building issue range is three to seven days. In special conditions, the company can request an extension.
Companies usually reveal their opening days in the Red Herring Prospectus (RHP is a prospectus with details like the number of shares offered, lot size of the IPO, number of days the issue would remain open, etc.). Thus, while asking for a uprisal, it has to make changes in its RHP and submit an application to the authorities.
Importance of Opening Days
Opening days are very crucial to both: the company as well as the investors.
It is during this time the company gets to know about its performance. A revision in opening days is also done because the company feels a change according to the applications it has received. Thus, opening days decide the performance of the company.
For an investor, opening days hold the money of your bid. The board keeps your bidding amount on hold until the result declaration. This means that you neither get the shares nor the money. As the issue finishes, you get to know the results.
The opening day window is very crucial for investors. Need help with how to make the right decisions and know if you should invest in some IPO or not? Shoonya is your answer.
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