Initial Public Offering

Initial Public Offering

Potentially lucrative rewards are available to those who participate in initial public offerings (IPOs). You should know the extra risks and regulations involved with initial public offering (IPO) investments and how trading these securities varies from regular stock trading before you invest.

What is an Initial Public Offering?

The first time the public may buy shares in a privately held firm is through an initial public offering or IPO. Companies can attract public investors and their equity capital through initial public offerings (IPOs).

When a firm goes public, existing private investors usually receive a share premium, so this is a good opportunity for them to cash out all their profits. At the same time, it opens the door for public investors to join the sale.

Understanding Initial Public Offering 

An initial public offering (IPO) is the first sale of stock by a private firm to the general public. An initial public offering (IPO) essentially signifies a change in ownership from private to public ownership of a corporation. The process of an initial public offering (IPO) is frequently called “going public” because of this. Companies of all sizes, from startups to those with decades of experience, have the option to go public through initial public offerings (IPOs). Common reasons for a firm to go public include paying off debt, funding expansion efforts, increasing visibility, or providing an opportunity for corporate insiders to diversify their portfolios or generate liquidity through the sale of private shares. When a business decides to “go public,” the next step is to select a lead underwriter who will assist with registering securities and distributing shares. The lead underwriter will create a syndicate of investment banks and broker-dealers to sell shares of the initial public offering (IPO) to institutional and individual investors. 

Types of Initial Public Offering 

Many IPO Types 

Two primary forms of initial public offerings (IPOs) are used today. These individuals are- 

1) Fixed Price Offering 

Some corporations’ initial share offerings (IPOs) have a fixed price, often known as the issue price. Once a firm decides to go public, investors find out how much their stocks are worth. 

Once the issuance is concluded, the market demand for the stocks may be determined. Investors who wish to participate in this initial public offering (IPO) must apply for shares at the full price. 

2) Book Building Offering 

During book building, the firm launching an initial public offering offers investors a 20% price band on equities. Before the final price is determined, interested investors place bids on the shares. Investors must indicate their share price and the quantity of shares they wish to purchase here. 

The term “floor price” describes the lowest possible share price, while “cap price” describes the maximum possible stock price. Investors’ bids ultimately decide the share price. 

Working on Initial Public Offering 

Companies are deemed private before they go public. Early backers, including the founders, family, friends, and professional investors, such as VCs and angels, have contributed to the firm’s growth as a pre-IPO private company with a limited number of shareholders. 

A major milestone for every firm is the initial public offering (IPO), which opens the door to a flood of capital. This opens up more opportunities for the organisation to grow and flourish. It may also be able to secure better conditions when borrowing money thanks to the enhanced transparency and legitimacy of its share listing. 

Advertising an interest in going public occurs when a firm feels it is ready to handle the demands of SEC laws, public shareholder advantages and duties, and the inevitable challenges that come with it. 

This growth stage is typically experienced by companies that have achieved unicorn status, defined as a private valuation of around $1 billion. Nevertheless, according to listing standards and market competition, private firms with solid fundamentals and shown profitability potential might potentially be eligible for an initial public offering (IPO). 

Underwriting due diligence helps value a company’s initial public offering (IPO) shares. When a company goes public, ownership of its shares changes from private to public, and the value of the shares held by current private shareholders increases to their market value. Underwriting for shares may also contain unique clauses about the conversion of private to public ownership. 

Alternatives to Initial Public Offerings 

Direct Listing 

The absence of underwriters in an initial public offering (IPO) results in a direct listing. By passing the underwriting procedure, direct listings expose issuers to more risk in the event of a poor offering performance; nevertheless, issuers have a better chance of realising a higher share price. Only companies with strong brands and promising business models can often pull off a direct offering. 

Dutch Auction 

There is no predetermined IPO price in a Dutch auction. Interested parties can bid on shares based on their price points. The available shares are thereafter distributed to the bidders who expressed the highest level of willingness to pay. 

In summary 

You commit to buying shares of stock in an initial public offering (IPO) at the price they’re being sold at before the stock hits the secondary market. The issuer and lead underwriter consider various criteria, including the level of interest shown by potential investors, when determining this offering price. 

You should check with your brokerage to see if they participate in new issue equity offerings and, if so, what the prerequisites are for investing in an initial public offering (IPO). Those qualified to participate in an initial public offering (IPO) are usually wealthy individuals or seasoned traders aware of the dangers involved. Due to high demand outstripping supply, individual investors may have trouble acquiring shares in an initial public offering (IPO). Many brokerage companies restrict access to initial public offerings (IPOs) because of their high demand. This is done by imposing trading frequency criteria, long-term client relationships, or large asset-holding requirements on potential participants. 

Frequently Asked Questions

A major milestone for every firm is the initial public offering (IPO), which opens the door to a flood of capital. This opens up more opportunities for the organisation to grow and flourish. It may also be able to secure better conditions when borrowing money thanks to the enhanced transparency and legitimacy of its share listing. 

Large investors like hedge funds and banks typically get first dibs on shares in an initial public offering (IPO), making it harder for regular people to buy in. Soon after an initial public offering (IPO), common investors can buy shares in the newly publicised firm. 

Public offering provides a way to invest in startups with the potential to generate money in the long run. Initial public offerings (IPOs) may be good for small investors because of the clear pricing and low entry points. To generate wealth, astute investors should keep an eye on forthcoming IPOs. 

To determine the price per share, an investment bank provides the firm with a valuation, which is subsequently divided by the total number of shares to be issued.


One way to offer assets to the general public is through an IPO, or Initial Public Offering. When it comes to money with a lengthy or indefinite maturity, it’s the biggest source for the firm. A company’s journey to success begins with an initial public offering (IPO). It opens the public capital market to a company’s funding needs. 

    Read the Latest Market Journal

    Weekly Updates 27/5/24 – 31/5/24

    Published on May 27, 2024 40 

    This weekly update is designed to help you stay informed and relate economic and company...

    Unlocking Stock Market Potential with AI

    Published on May 24, 2024 78 

    Introduction of AI In the world we live in today, artificial intelligence (AI) is almost...

    Financial Sectors Thriving: Top Traded Counters in April 2024

    Published on May 21, 2024 92 

    At a glance: The Federal Reserve (Fed) held interest rates steady at 5.25% to 5.5%...

    One Dollar at a Time: The Potential of Fractional Shares

    Published on May 20, 2024 91 

    Table of contents 1. Introduction 2. Dollar-Cost Averaging 3. Popularity of Dollar-Cost Averaging 4. Small...

    Unit Trusts vs Exchange Traded Funds (ETFs) – Which is better for your portfolio?

    Published on May 20, 2024 90 

    Imagine you are dining at a nice restaurant, feeling overwhelmed by the variety of seemingly...

    Weekly Updates 20/5/24 – 24/5/24

    Published on May 20, 2024 22 

    This weekly update is designed to help you stay informed and relate economic and company...

    What is CFD? With 2 Practical Examples

    Published on May 15, 2024 108 

    In this article, you will learn what CFD (Contract for Difference) is, the costs and...

    What is ESG investing, and why is it important?

    Published on May 15, 2024 117 

    Over the last five years, Environmental, Social, and Governance (ESG) investing has evolved from being...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you


    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  


    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066