INTRODUCTION

IPO
stands for
Initial Public Offering
and means the newoffer of shares from a company which was previously unlisted. This
isdone by offering those shares to the public, which were held by thepromoters or
the private investors prior to the IPO. In the case whenother investors or Promoter
held the shares the stake holding comesdown to the extent their shares are offered
to the public. In other casesnew shares are issued to the public and the shares,
which are with thepromoters stay with them. In both cases the share of the
promoters inthe total capital comes down.For example say there are 100 shares in a
company and 50of these are offered to the public in an IPO then in such a case
thepromoter�s stake in the company comes down from 100% to 50%. Inanother case the
company issues 50 additional shares to the publicand the stake of the promoter
comes down from 100% to 67%.Normally in an IPO the shares are issued at a discount
towhat is considered their intrinsic value and that�s why investors keenlyawait
IPOs and make money on most of them. IPO are generally pricedat a discount, which
means that if the intrinsic value of a share isperceived to be Rs.100 the shares
will be offered at a price, which islesser than Rs.100 say Rs.80 during the IPO.
When the stock actuallylists in the market it will list closer to Rs.100. The
difference betweenthe two prices is known as Listing Gains, which an investor
makeswhen investing in IPO and making money at the listing of the IPO. ABullish
Market gives IPO investors a clear opportunity to achieve longterm targets in a
short term phase.