IPO

https://zerodha.com/varsity/chapter/the-ipo-markets-part-1/

Before understanding why companies go public, it is important to understand the origin of business
The people who invest in your business in the pre-revenue stage are called Angel Investors
Angel investors take the maximum risk. They take in as much risk as the promoter
The money that angels give to start the business is called the seed fund
Angel's invest relatively a small amount of capital
Valuation of a company simply signifies how much the company is valued at. When one values the company they consider the company's assets and liabilities
Face value is simply a denominator to indicate how much one share is originally worth
Authorized shares of the company are the total number of shares that are available with the company
The shares distributed from the authorized shares are called the issued shares. Issued shares are always a subset of authorized shares.
The shareholding pattern of a company tells us who owns how much stake in the company
Venture Capitalists invest at an early stage in business; they do not take as much risk as Angel investors. The quantum of investments by a VC is usually somewhere in between an angel and private equity investment
The money the company spends on business expansion is called capital expenditure or CAPEX
Series A, B, and C, etc are all funding that the company seeks as they start evolving. Usually higher the series, higher is the investment required.
Beyond a certain size, VCs cannot invest, and hence the company seeking investments will have to approach Private Equity firms
PE firms invest large sums of money and they usually invest at a slightly more mature stage of the business
In terms of risk, PE's have a lower risk appetite as compared to VC or angels
Typical PE investors would like to deploy their own people on the board of the investee company to ensure business moves in the right direction
The valuation of the company increases as and when the business , revenues and profitability increases
An IPO is a process by means of which a company can raise fund. The funds raised can be for any valid reason -- for CAPEX, restructuring debt, rewarding shareholders, etc

https://zerodha.com/varsity/chapter/the-ipo-markets-part-2

IPO sequence of events

Appoint a merchant banker - In case of a large public issue, the company can appoint more than 1 merchant banker
Apply to SEBI with a registration statement-- The registration statement contains details on what the company does, why the company plans to go public and the financial health of the company
Getting a nod from SEBI -- Once SEBI receives the registration statement, SEBI takes a call on whether to issue a go-ahead or a 'no go' to the IPO
DRHP -- If the company gets the initial SEBI nod, then the company needs to prepare the DRHP. A DRHP is a document that gets circulated to the public. Along with a lot of information, DRHP should contain the following details:
- The estimated size of the IPO
- The estimated number of shares being offered to the public
- Why the company wants to go public and how does the company plan to utilize the funds along with the timeline projection of fund utilization
- Business description including the revenue model, expenditure details
- Complete financial statements
- Management Discussion and Analysis -- how the company perceives future business operations to emerge
- Risks involved in the business
- Management details and their background
Market the IPO -- This would involve TV and print advertisements in order to build awareness about the company and its IPO offering. This process is also called the IPO roadshow
Fix the price band -- Decide the price band between which the company would like to go public. Of course, this can't be way off the general perception. If it is, then the public will not subscribe for the IPO
Book Building -- Once the roadshow is done and the price band fixed the company now has to officially open the window during which the public can subscribe for shares. For example, if the price band is between Rs.100 and Rs.120, then the public can actually choose a price they think is fair enough for the IPO issue. The process of collecting all these price points along with the respective quantities is called Book Building. Book building is perceived as an effective price discovery method
Closure -- After the book building window is closed (generally open for few days) then the price point at which the issue gets listed is decided. This price point is usually the price at which maximum bids have been received.
Listing Day -- This is the day when the company actually gets listed on the stock exchange. The listing price is the price decided based on market demand and supply on that day and the stock is listed at a premium, par or discount of the cut-off price

What happens after the IPO?

During the bidding process (also called the date of issue) investors can bid for shares at a particular price within the specified price band. This whole system around the date of the issue where one bids for shares, is referred to as thePrimary Market. The moment the stock gets listed and debuts on the stock exchange, the stock starts to trade publicly. This is called the secondary market.

Once the stock transitions from primary markets to secondary markets, the stock gets traded daily on the stock exchange. People start buying and selling stocks regularly.

Few key IPO jargons

Under subscription - Let's say the company wants to offer 100,000 shares to the public. During the book-building process, it is discovered that only 90,000 bids were received, then the issue is said to be under subscribed. This is not a great situation to be in as it indicates negative public sentiment

Oversubscription - If there are 200,000 bids for 100,000 shares on offer then the issue is said to be oversubscribed 2 times (2x)

Green Shoe Option -Part of the underwriting agreement which allows the issuer to authorize additional shares (typically 15 percent) to be distributed in the event of oversubscription. This is also called the overallotment option

Fixed Price IPO - Sometimes the companies fix the price of the IPO and do not opt for a price band. Such issues are called fixed price IPO

Price Band and Cut off price - Price band is a price range between which the stock gets listed. For example, if the price band is between Rs.100 and Rs.130, then the issue can list within the range. Let's says it gets listed at 125, then 125 is called the cut off price

OFS - Offer For Sale

FPO - Follow-on Public Offer (Further Public Offer)

https://zerodha.com/varsity/chapter/supplementary-note-ipo-ofs-fpo

How are IPOs Pumped and Dumped in India | Mamaearth Profit 22Cr, Valuation 24,000 Cr - YouTube