Surfing through the ocean of information on the internet, it is not uncommon for you to find IPOs as one of the ways to make money. However, if this is your first time we will try our possible best to expose you to key concepts on the subject matter.
The cryptocurrency market and the stock market are similar in the sense that both markets are full of risks, uncertainties, and speculations. In the crypto market, for example, you want to be able to buy cryptocurrency in India, and make your profit within a short period because you believe the coin is capable of making you that profit.
The same thing applies to the stock market, you want to be able to buy a stock with the hope that its value increases and it makes you profit within a short period and that is where the concept of IPO becomes important because it allows you to buy a stock at a very low price.
What is an IPO?
IPO is an acronym for Initial Public Offering. It is a very fashionable process because of the hype it comes with. It is usually impossible for the public to purchase a share in a private company but with an IPO it becomes easy and possible.
It is a process where privately owned companies become publicly-traded companies by offering its shares to the public. It allows the public to purchase shares in the company on the ground floor before the company has a chance to mature, allowing them to capitalize on its growth from the beginning to make a profit.
There are several reasons why companies partake in IPO and some of them include:
- They use it to raise capital to an extent for their business. Instead of a company taking a loan and having to think of interest, they can decide to sell off some piece of shares to raise money.Â
- It is an opportunity to grow the business
- IPO allows the company to be traded on the stock exchange providing liquidity to the company founders and investors.
- It allows investors to take advantage of a higher valuation.
- Whenever a company is going public for IPO, it means the company is sure it has gotten enough acceptance in the public so it can be a thing of credibility to the company.
Types of IPO
There are three major types of IPO offered by companies and they include the fixed, the book building, and the auctions. The fixed IPO is a type of issuance in which the company states the price they are willing to sell their share before the investment is opened. This ensures that whenever the public wants to invest they invest at a particular fixed price.
The second type of IPO is the book building where the company collects information from potential investors on how much they are willing to pay. They then use the price range and the number of shares intended to purchase to set a suitable price for the share.
The last type of IPO is the auction where several investors bid for the price they want to buy the shares until it reaches a fixed price.
Is it difficult to invest in an IPO nowadays?
Investing in an IPO is not easy. It is a demanding task, especially in India. Unlike cryptocurrency that only requires you to register on an exchange and have a wallet then you can buy Bitcoin in India or you can buy cryptocurrency in India without stress.
The information of available IPO hardly gets to most of the masses and when they do, the allocations are usually saved for a special client or very rich and popular clients, so it might be difficult for the general mass to get in.
At times getting in isn’t as rigorous as finding the right IPO, it is usually very difficult to scrutinize without sentiment the best IPO because of the hype it usually comes with. You really can’t tell which one will turn out to be a profitable investment and which one will fail. However, you should do your research on the product and services offered by the company and be convinced with its underlying technology just as you do your diligent research whenever you want to buy Bitcoin in India.
However, whenever a company wants to raise capital through IPO, you should only do that after careful consideration because it can be used as a money exit scam by the founder and shareholder, therefore they need to convince you that most of the money is truly going to be utilized as capital to expand the business.
Truly companies like Google, Facebook, Tesla, and Alibaba were at a time in the IPO stage and people that invested in it then had made millions of dollars in profit but they are few out of the many. You need to know when to buy the shares and also when to pick your profit.
Things to Know before venturing into IPO
- Know the company to some certain extent. Know if it isn’t in debt of any kind because it might end up using your funds to clear its debts
- Weigh your potential risk and profit just like you do when you want to buy cryptocurrency in India
- Whenever you buy an IPO, always remember that it is now part of your investment portfolio, you now own a part of the company, and you share the loss and profit of the company
- Always pick your profit.
In conclusion, we have been able to discuss what an IPO is and briefly said a thing or two about its types. We have also tried to answer the question of is it difficult to invest in an IPO in recent times and the things you should know before investing in an IPO.
Investing in an IPO is the choice of the investor and it is a way to amplify one’s investment portfolio but picking the right IPO might be a little challenging, same as knowing when to enter and when to exit an IPO, however, you can decide to buy cryptocurrency in India instead.
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