What are IPOs?
The term IPO stands for ‘Initial Public Offering’. This is when a company offers shares in its business to the public for the first time, and 'lists' these shares on a securities exchange once the offer is completed. It is also called ‘floating the company’.
For investors, IPOs present an opportunity to gain a share in the ownership of a growing business. After investing in an IPO, investors can sell the shares (or buy more) on a securities exchange such as the Australian Securities Exchange (ASX).
IPOs: the challenge for retail investors
IPOs have traditionally been offered to institutional investors and access to IPOs, especially sought-after deals, is hard to come by for self-directed or retail investors.
There are three key challenges for retail investors seeking to invest in IPOs:
Challenge 1: Getting access
On average over the last few years, around 80-100 companies have listed on the ASX per annum. Traditionally, to ensure that an investor can participate in the IPO process, the investor needed to set up an account with a broker.
The broker or lead manager of the IPO will typically provide access to the IPO, only to those retail investors who have an account with his or her broking firm. Retail investors who are not associated with that broker or lead manager are consistently excluded from their IPOs.
With the OnMarket app and bidding platform, investors can access IPOs with or without a broker account (although investors will need a broker account to sell the shares).
Challenge 2: The fragmented broker market
The Australian broker market is highly fragmented, which means that even if a retail investor has a broking account, or several broking accounts, this may not lead to increased accessibility to IPOs. In this fragmented market, it is rare for even the largest lead manager or broker to gain access to more than 10 IPOs per year for their retail clients.
The key difference with OnMarket is that we are entirely broker agnostic and investors get access to IPOs, no matter who their broker account is with or which lead manager is conducting the IPO. Over the last few years, OnMarket has worked with over 70 lead managers and brokers and typically provides access to around 1/3 of all ASX IPOs.
Challenge 3: Lack of information
Retail investors generally face a lack of information when a company is undertaking an IPO. Even if an investor does get invited to participate in an IPO by their broker, they are unlikely to have access to the same information as institutional investors. This can make it hard to make a well-informed decision and to invest effectively.
Information that a retail investor may commonly find it difficult to get hold of includes knowledge about management (such as a through an interview with the CEO) or independent research. In contrast, institutional investors receive a breadth of information before an IPO, which often includes face to face meetings with management.
The OnMarket app and bidding platform provides as much information as possible and aims to present this information in an easy to interpret and easy to understand format. This includes a video interview with the CEO of the company, or the Chairman of the board.
FAQs
How To Get Allotment In IPO
- 18 January, 2024. ...
- Methods to increase chances of IPO allotment. ...
- If you're wondering how to get an IPO allotted successfully, follow these strategies: ...
- Make multiple submissions using different Demat Accounts. ...
- Opt for a cut-off price or higher price band bidding. ...
- Timely IPO subscription matters.
You can buy an IPO both online and offline. To proceed with the offline method, you need to submit a form to your broker or IPO banker. On the other hand, the online method requires logging in to your banker or broker's trading interface. It can be more convenient to apply for an IPO online than offline.
Are IPOs a good investment? ›
As with any type of investing, putting your money into an IPO carries risks—and there are arguably more risks with IPOs than buying the shares of established public companies. That's because there's less data available for private companies, so investors are making decisions with more unknown variables.
What is the best way to invest in pre-IPO? ›
To invest in pre-IPO stocks, there are three main methods: private equity investment platforms, direct purchases from companies, and indirect investments. Each method presents unique advantages and challenges.
How do I get luck in IPO? ›
To improve your chances of IPO allotment, avoid submitting big bids, especially in oversubscribed IPOs. Spreading your investment across numerous smaller bids might be helpful, as SEBI regards all retail applications equally up to ₹2,00,000.
How do I apply for an IPO smartly? ›
You can apply for an IPO both online and offline. If you wish to apply for an IPO offline, you need to submit a form to your IPO banker or broker to initiate the process. On the other hand, when applying for an IPO online, you need to log in using the trading interface provided by your banker or broker.
What is the minimum amount to invest in IPO? ›
As per SEBI guidelines, every applicant needs to invest a minimum amount in the IPO of a company. This minimum amount can range from INR 10,000 to 15,000. Based on the lot size, people can invest only that amount or in multiples of it.
Which IPO is best to buy? ›
TOP PERFORMING IPOs
| IPO Name | LTP () | CHG (%) |
|---|
| S A Tech Software India Ltd | 160.6 | 172.2 |
| Premier Energies Ltd | 1134.85 | 152.19 |
| VVIP Infratech Ltd | 233.85 | 151.45 |
| Bajaj Housing Finance Ltd | 173.66 | 148.09 |
6 more rowsIPOs are extremely expensive. A company with about $100m in revenue will pay between $9-26m to go public. For a company generating $100m a year, this means an IPO cost 16% of their revenue to raise a round of capital : likely the most expensive capital raise of the company's life.
How to find stocks before they go public? ›
IPO investors can track upcoming IPOs on the websites for exchanges like Nasdaq and the New York Stock Exchange, and various specialty websites. These include Google News, Yahoo! Finance, IPO Monitor, IPOScoop, and Renaissance Capital IPO Center.
Best Pre IPO brokers in india
- Other Top Pre-IPO Brokers in India:
- ICICI Securities: ICICI Securities is a leading brokerage firm in India known for its robust research capabilities and broad market reach. ...
- Axis Capital: ...
- Kotak Securities: ...
- Edelweiss Financial Services: ...
- Motilal Oswal Securities:
IPO allotment depends on the demand of IPO shares. If the IPO is oversubscribed (received more bids then the shares offered), not all investors may receive an allocation. If the IPO is not fully subscribed, all investors will receive allotment.
Why am I not getting any IPO allotment? ›
When the number of applications is greater than available lots of shares (that is, when the IPO is oversubscribed), allotment is done through a lottery system conducted by the company. In such cases, you will be allotted shares only if your application is picked up in the lottery.
How does the IPO allotment algorithm work? ›
This one is fairly straightforward. If one applies in the pro-rata allotment category, one receives shares proportionate to the application and the total subscription. For example, if an IPO in the given category is subscribed 10 times and you apply for shares worth Rs. 50 lakhs, you'll be allotted shares worth Rs.
Which broker has the highest IPO allotment? ›
3. Who are the best IPO brokers in India?
- Zerodha Broking Ltd.
- Upstox Stock Broker.
- 5paisa Stock Brokerage firm.
- Groww Stock Broker.
- Paytm Money.
