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IPO (Initial Public Offering) Overview of This Process and It’s Effect

The IPO is inviting the public to subscribe for securities of the company public shareholding under the articles of incorporation or upon increasing the capital of the company list in accordance with the terms and conditions presented legislation in force, and is the IPO one of the important methods of corporate finance to enable them to achieve the goals intended from its inception, in addition to its contribution in expanding the base of investors in the stock market.

IPO Basics

When you establish a shareholding company must be on the founders to specify in the memorandum and the basic maximum number of shares that can be the company-issued and nominal value of the share which capital the authorized.

In the case of the company’s desire to obtain funds to start its activity must be done by the issue of shares which does not exceed the maximum authorized and that after the notification of the Capital Market Authority.

When you view the issued shares or part thereof, whether at the time of incorporation or at Capital Increase it is called it is put up for a public subscription.

The exporting company employs investment banks and brokerage companies to promote and cover the subscription by individual and institutional investors.

The door opens in front of the public for a public subscription after the offering price by all of the issuing company and the Bank of investment and brokerage firms and the Capital Market Authority at this price.

Progressing potential investors their applications to buy shares during the subscription process, if the applications the more the number of shares offered for sale the process of allocation of shares to investors by the number of shares issued the number of shares subscribed from The Awl which it is reported that the IPO had been covered more than once.

If the number of purchase orders less than the stock of the opposition knows that the subscription is not fully subscribed may be extended the subscription period until the coverage fully, the not that set on which the bank received the amounts from the underwriters on behalf of the company to respond to them such amounts in full is received and the subtraction operation.

After the issue of stocks, the company is listed on the stock exchange so that investors can trade it. And the stock price moves according to the supply and demand movement in the market.

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Questions an Investor Needs to Ask Before Investing in IPO

Who gets the money?

Sometimes the founding shareholders get some or all of the equity money, in which case the reason for the sale should be asked.

So that the purpose is not to use some of the company’s funds for personal purposes such as diversifying their portfolio of assets.

It is important to ensure that the return from the sale of shares will be invested in the expansion and development of the company.

Why now?

The company may sell the stock because they need financing for growth or may see the members of the company that this is the best time for the sale to achieve the highest price of a share.

The danger here is misjudgment, and if this is not the best time to actually sell, the investor will face significant risks.

Is the company profitable?

If the company is not profitable, investment risks will increase.

Are stocks expensive or cheap?

While shareholders want to sell shares at a high rating level, investors want a low rating, so that there is room to increase the stock price.

Often, those who sell stocks will focus on comparing them to high-value trading operations, so that the stocks they sell appear to be cheap in return.

However, the best way is to compare the price of the company’s shares with the shares of competitive companies operating in the same sector and country, which has a growth rate similar.

Can the Investor Get the shares?

In order to receive the investor shares should be intermediate last part of the process of the IPO or have relationships with banks relevant to the work of the IPO.

Most intermediaries tend to provide equity shares to their preferred clients, who pay large sums in the trading process, so large investors get the largest share, and what remains goes to individual investors.

How much is the fee?

It was possible to get investment banks in the past to 7% of the total proceeds during the IPO process, but now the message that you get banks ranging between 3 and 5%.

The investor must bear in mind that the financial intermediary imposes charges on the sale of shares in the IPO much higher than on the shares already traded.

What are Shareholder Rights?

Include the rights of shareholders granted by the company their right to vote, and the common is “the arrow helps image “, but that began to change especially in the technology sector, according to the numbers.

Company “Google” has issued ordinary shares of Category “A” for new investors one vote per share, while founders equity category “B” involving 10 times the number of votes per share, and the company “Facebook” a similar thing.

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