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IPO & FPO - Investment Fundamentals, Investing in Stock Markets Video Lecture | Investing in Stock Markets - B Com
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FAQs on IPO & FPO - Investment Fundamentals, Investing in Stock Markets Video Lecture - Investing in Stock Markets - B Com
| 1. What is an IPO and how does it work? |  |
Ans. An IPO, or Initial Public Offering, is the first sale of shares by a private company to the public. It is a way for a company to raise capital by offering ownership in the company to the public. When a company decides to go public, it hires an investment bank to underwrite the offering. The investment bank helps determine the offering price, prepares the necessary documents, and assists in marketing the shares to potential investors. Once the IPO is completed, the company's shares are listed on a stock exchange, and investors can buy and sell these shares.
| 2. What is an FPO and how does it differ from an IPO? | |
Ans. An FPO, or Follow-on Public Offering, is when a company that is already publicly traded issues additional shares to the public. Unlike an IPO, where a private company goes public for the first time, an FPO is conducted by a company that is already listed on a stock exchange. FPOs can be used for various purposes, such as raising additional capital for expansion, reducing debt, or allowing existing shareholders to sell their shares. The process of conducting an FPO is similar to an IPO, with the company working with investment banks to underwrite the offering and market the shares to investors.
| 3. How can investing in IPOs and FPOs be beneficial for investors? | |
Ans. Investing in IPOs and FPOs can be beneficial for investors in several ways. Firstly, if an investor is able to get in on an IPO at the offering price, they have the potential to make significant gains if the stock price rises after the company goes public. This is because the offering price is usually lower than the market price once trading begins. Secondly, participating in an FPO can provide investors with an opportunity to increase their ownership in a company they believe in, or to diversify their portfolio by investing in different companies. Additionally, investing in IPOs and FPOs can allow investors to support new and growing businesses, which can be rewarding both financially and morally.
| 4. What are the risks associated with investing in IPOs and FPOs? | |
Ans. Investing in IPOs and FPOs also comes with certain risks. Firstly, there is the risk of the stock price falling after the initial excitement of the offering wears off. This can result in losses for investors who bought the shares at a higher price. Secondly, it can be challenging to accurately value a company that is going public or issuing additional shares. This can make it difficult for investors to determine whether the offering price is fair and whether the company is a good investment. Additionally, there may be limited information available about the company's financial performance and future prospects, as IPOs and FPOs typically involve younger companies. It is essential for investors to thoroughly research and assess the risks before investing in IPOs and FPOs.
| 5. How can investors participate in IPOs and FPOs? | |
Ans. Investors can participate in IPOs and FPOs through various methods. One common way is to open an account with a brokerage firm that offers access to new offerings. Investors can then place orders for shares through their brokerage account. Another method is to participate in the offering through a mutual fund or exchange-traded fund (ETF) that focuses on investing in IPOs and FPOs. These funds often have established relationships with underwriters and may have access to shares at the offering price. It is important for investors to stay informed about upcoming offerings and to understand the specific requirements and procedures for participating in each offering.
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