Initial public offering is the way to go public for any company. IPO is one of the basics of investment that is used by the companies to raise financing. The companies use two types of IPO including fixed price and book building. The investors can choose to buy a share before the availability to general public in share market by participating in the initial public offering. IPO is the right step taken by the firms to raise the money with the public market. The company will get a boost for further explanation by using the strategy of initial public offering. If you want more information about initial public offering in the share market.
Types of IPO:
The company can make an offer of initial price by using the following kinds of IPO or can use the combination of both of the types of IPO. Visit this website and get complete information about the types of IPO as given below.
- Fixed price issue:
The company will offer the shares at a fixed price do the investors in this type of IPO. The investors get complete information about the price of share before the shares are offered for public. In this type of IPO, the investor will need to make payment of full price of the shares while going to apply for IPO. In this type, the price is set after the complete evaluation of all financial aspects of the company. The price will be available in the printed document that will elaborate the price by considering various factors. To get additional information on this type of IPO.
- Book building issue:
Book building issue, the company will offer only 20% of the price on the shares to investors of the company. In this type of IPO, the investors will make a bid before the clearance of final price. The investor will declare the number of shares they want to buy and the amount they want to invest for the shares in the market.However, there will be the lowest and highest prices of the shares in the market. The final price will be fixed after closing of the bidding process and it will depend on the bids decided by the investors.
Fixed price issue VS book building issue:
Under the applications of fixed price issue, the investors will make an advance payment of 100% amount while the investors will only pay 10% of the total payment in advance in the case of book building issue.
In fixed price issues, 50% of shares will be reserved for applications having value above Rs 1 Lakh. On the other hand, 50% of shares will be reserved for QIB’s and book building issue. 35% of shares will be reserved for small investors and balance shares will be available for other investors in the market.
The organisations used either fixed price or book building issue or they can use both of the types of IPO at the same time. It is a perfect source to raise the capital for expansion of the business for any company. For the beginners, this can be a tricky because of Limited information available on it.