Sula became a public company by presenting its IPO. However, not just IPOs but companies also present Further Public Offerings, right issues, private placements, and preferred allotments.
What is an Issue?
An issue in the stock market represents an offer by any company. When a company offers its securities in the form of shares to anyone, it is called an issue. These issues are performed for various reasons like repaying debts, expansion, or any kind of financial appraisal. Issues can only be made until the investor has an appetite for the company’s debts. This appetite is only fulfilled when the company can make bond payments. If a company overdoes issues to raise funds, it would ultimately result in the downfall of its stock market prices.
Timeline of an Issue
Different types of issues have different timelines. Let’s look at them in detail.
1. Initial Public Offering
Initial Public Offerings or IPOs are the most famous and common issue. It involves the company hiring a lead manager, registrar, and investment bank for all the procedures. A company has to produce a Red Herring Prospectus or RHP before the IPO. SEBI approves the prospectus, and then the IPO begins. An IPO continues from three to five days. During this, if the IPO is a book-building issue, you need to bid on a price. On the last day of the IPO, the company reveals its cut-off price, and the shares are allotted accordingly.
After the allocation of shares in an IPO, it takes six days for the company to get listed in the market. During these six days, SEBI allocates the shares and decides the listing price.
Ideally, it takes three weeks after the closure to get listed in the market for a book-built issue. For a fixed issue, this time is increased to 37 days. However, the listing usually happens before the given time.
2. Right Issues
Right issues are the issues offered only to existing shareholders. A company may offer these shares to increase liquidity. It depends on the shareholders if they want to purchase the right-issued shares. Right-issue shares are usually listed in the market after 3 to 6 days. Then, as the company is already listed, the process becomes easier.
3. Follow-on Public Offerings
Follow-on Public Offerings, or FPOs, are conducted by a company that has already brought an IPO. These companies come forth with a second issue for further dilution and offer an FPO. These FPOs take lesser time to get listed in the market for the same reason. The company has already gone through the entire process through SEBI.
There are several kinds of issues coming in the market these days. Of course, IPO is the most common. However, to invest in IPOs, you should research well.
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