Initial Public Offering (IPO) Any company brings it when it needs funds. In such a situation, she sells some shares by offering IPO among the public and spends the funds received through IPO according to her need. The company gets funds from the IPO, while the investors get a stake in that company. That is, it has the advantage of both. Since the stock market is unpredictable, it gives rapid gains, then it can also cause losses, so before investing in the IPO of any company, you should keep some things in mind, so that there is no scope for regret later.
Before investing in any IPO, decide your target i.e. you should know whether you are investing in it to take advantage of listing gains, or are investing for a long time. Many times the benefit that you get in listing gain is not necessarily available even further.
Must see company prospectus
When a company launches an IPO, that company tells in the prospectus where it will use the funds received from the IPO. So do not ignore this point. Generally, the company which raises funds to increase the capacity or business, their growth potential is very high and the money invested in them also gives you profits.
Compare company valuations
The company whose IPO offer has come, its price to earnings ratio, price to book ratio and how much debt to earnings ratio on the company must be seen. Apart from this, how much the valuation of the company has been fixed, it should be compared with other companies involved in the industry.
Don’t get influenced by investing
Do not invest seeing that a veteran person has a stake in the company. Rather, necessary information should be gathered about all the promoters of the company. Being influenced by the name of a famous person, the decision to invest can prove to be wrong at times.
View gray market trends
If you are looking to invest for a short period of time, it is prudent to look at the gray market trends before investing. This gives you an idea of how much profit can be made at the price fixed for the IPO subscription. In the long run, you should take a decision based on the fundamentals of the company.