What is IPO Listing and Its Process?

Companies often go public to raise a significant sum of money in exchange for securities. When a private firm is certain to become public, it initiates the IPO process. Companies that wish to become publicly traded go through a procedure that complies with exchange regulations.

What is an IPO Listing?

An unlisted firm is listed on a stock exchange through an initial public offering (IPO), in which it sells shares on the open market. An initial public offering can be used to extend an organization’s current activities, launch new initiatives, or accomplish any other objective indicated by the company in its offer document.

IPO Listing Process

  1. When a private company chooses to raise capital by going public, the firm engages an underwriter, who sets the price range, the number of shares to be issued, and other parameters after assessing the company’s financial needs.
  2. They then submit the application/proposal for clearance to the SEBI, which comprises information on the company’s historical financial performance, including: 
  • Liabilities/Debts
  • Profits
  • Net worth  
  • Assets
  • The intention behind raising money.
  1. SEBI permits the issuance of the “red herring prospectus” after carefully analyzing the proposal and verifying that all eligibility requirements have been completed. It is a company-issued document that provides the number of shares and the issue price to be offered in the IPO. In the red herring prospectus, the company’s prior performance is also discussed.
  2. After this, to meet and convince potential investors to buy shares of their company, corporate executives then participate in a “roadshow.” Although normally available for five days, an IPO listing can begin and last for 3-21 days.
  3. Retail investors can put online bids for equities. Investors need to have a Demat account and PAN card to participate in an IPO listing. If the shares are allocated, they will be transferred to your Demat account. If not, a refund will be given to you.

What is an IPO Listing Date?

The IPO Listing Date is the day on which IPO shares can be purchased and sold on stock exchanges (BSE and NSE). Once an IPO is over and shares have been allocated, the company’s shares are formally listed on the stock market. The day shares become tradable on the market is known as the listing date.

This day is important because traders who missed the initial public offering can now buy it on the share market. Furthermore, investors who got shares in the initial public offering (IPO) may try to benefit from the listing by trading their shares.

How the listing price is decided?

  • Demand

The IPO listing price is based on the firm’s demand and the market’s offering. As a result, the listing price grows in direct proportion to demand. The growth potential, sector, and anticipated valuation are just a few factors affecting demand in the IPO.

  • Offer For Sale Value

The offer for the sale of an IPO is the number of shares that a current investor is prepared to dilute with the IPO. Therefore, higher OFS levels may have a negative impact on listing prices.

  • Grey Market

To buy IPO shares or applications, investors are willing to pay an extra amount known as a “grey market premium.” It is an unregulated place that offers information about IPO demand.

These factors have an impact on the listing price of an IPO.