An Initial Public Offering (IPO) is when a company sells its shares to the public for the first time. The company raises capital by getting listed on the stock exchanges.
Let’s take a look at important terms like GMP, OFS and more to understand IPOs better.
Grey Market Premium (GMP) is the price difference between an IPO's issue price and its unofficial trading price before its official listing. It indicates the market demand for the shares.
An offer-for-sale (OFS) is when existing shareholders of the company sell a part of their holdings in an IPO. The proceeds from the issue go to the shareholders and not the company.
A fresh issue is when a company issues new shares to raise funds in an IPO. The proceeds from the fresh issue are used for company growth, debt repayment and other operations.
In an IPO, the lot size is the minimum number of shares investors can apply for. It decides the minimum investment needed for applying to the issue and applications are made in multiples of this number.
The price band is the range in which investors can bid for shares in an IPO. The final price is decided based on market demand and subscriptions for the issue.
The subscription status shows how many times an IPO is booked. It compares the shares bid for to the shares offered. A high subscription for an IPO means strong investor interest.
Listing day is when the company’s shares are listed on the stock exchanges and are open for trading. The listing price depends on market demand and investor sentiment for the IPO.
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