All about Initial Public Offer


It’s really sick to learn about fascinating things like the IPO in stock market via standard theories. In order to understand about the functioning of IPOs, I’ve taken an example for the building of this rudimentary concept. A company has issued 1000 shares of a face value of Rs.10 each. The shares are equally held by the two promoters X and Y. The company decides to make a fresh issue of 500 shares. The fresh issue of shares in the IPO will result in the following post-IPO situation: The issued capital of the company will now be 1500 shares with a face value of Rs.10 each. Promoters X and Y continue to hold 500 shares each. The percentage holding of each of the promoters in the share capital of the company will change from 50% (500 shares out of 1000 shares issued by the company) to 33.33% (500 shares out of 1500 shares issued by the company). Now, the company decides to offer 250 shares of each promoter to the public. The offer for sale in the IPO will result in the following post-IPO situation: The capital of the company will remain at 1000 shares with a face value of Rs.10 each. The holding of the promoters will decrease to 250 shares each from 500 shares each pre-issue. They now hold 25% each of the share capital; 50% is held by the public. The money raised in the IPO will go to the promoters who have sold the shares and not to the company. If stated simply, the first public offer of shares made by a company is called an Initial Public Offer (IPO). Avail of the stock cash tips at 24 Carat where we provide best equity tips and knowledge base to novices.

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