19-07-2013, 02:27 PM
PROJECT REPORT ON INITIAL PUBLIC OFFERING (IPO)
INITIAL PUBLIC OFFERING .doc (Size: 122.5 KB / Downloads: 136)
EXECUTIVE SUMMARY
Organisations pursue collective goals. There are different types of organisations.
Business organizations have four basic internal functions which they must manage and control.
There are various fund raising methods.
Initial public offering (IPO), also referred to simply as a "public offering".
There are different methods of going public and there is risk involved in investing in IPO.
Any company which wishes to become public limited can adopt the route.
A financial market is a mechanism that allows people to easily buy and sell financial securities commodities.
The primary is that part of the capital markets that deals with the issuance of new securities.
The secondary market is the financial market for trading of securities that have already been issued in an initial private or public offering.
AIM OF THE STUDY
The purpose of this study is to have a thorough knowledge of IPO. So we are also learning the types of organisation and their functions. The reasoning such as why and what helps us to clear the doubts about IPO. The knowledge of markets helps us to know where the IPO is possible.
The various institutions involved are known so that organisations going for IPO are able to have easier access to these institutions.
The advantages and disadvantages of going for IPO are analysed.
Knowledge about successful and failure IPO are studied.
To have a overall understanding of the stock market in India.
FUND RAISING METHODS
Large corporations could not have grown to their present size without being able to find innovative ways to raise capital to finance expansion. Corporations have five primary methods for obtaining that money.
IPO: Initial public offering also referred to simply as a "public offering," is the first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded
Issuing Bonds: A bond is a written promise to pay back a specific amount of money at a certain date or dates in the future. In the interim, bondholders receive interest payments at fixed rates on specified dates. Holders can sell bonds to someone else before they are due.
Issuing Preferred Stock. A company may choose to issue new "preferred" stock to raise capital. Buyers of these shares have special status in the event the underlying company encounters financial trouble. If profits are limited, preferred-stock owners will be paid their dividends after bondholders receive their guaranteed interest payments but before any common stock dividends are paid.
Selling Common Stock. If a company is in good financial health, it can raise capital by issuing common stock. Typically, investment banks help companies issue stock, agreeing to buy any new shares issued at a set price if the public refuses to buy the stock at a certain minimum price
INVESTING IN AN IPO?
IPOs are inherently very risky business. As a result, there is potential for huge gains and huge losses. Since the company is starting to be listed on an exchange, there is no historical market data for it and very little to research. On the first day, the stock could gain hundreds of percentage points or lose hundreds of percentage points.
WHY IPO?
When a privately held corporation needs to raise additional capital, it can either take on debt or sell partial ownership. If the corporation chooses to sell ownership to the public, it engages in an IPO. Corporations choose to "go public" instead of issuing debt securities for several reasons. The most common reason is that capital raised through an IPO does not have to be repaid, whereas debt securities such as bonds must be repaid with interest. Despite this apparent benefit, there are also many drawbacks to an IPO. A large drawback to going public is that the current owners of the privately held corporation lose a part of their ownership. Corporations weigh the costs and benefits of an IPO carefully before performing an IPO.
IPO METHODS
GOING PUBLIC
If a corporation decides that it is going to perform an IPO, it will first hire an investment bank to facilitate the sale of its shares to the public. This process is commonly called "underwriting"; the bank's role as the underwriter varies according to the method of underwriting agreed upon, but its primary function remains the same.
In accordance with the Securities Act of 1933, the corporation will file a registration statement with the SEBI. The registration statement must fully disclose all material information to the SEBI, including a description of the corporation, detailed financial statements, biographical information on insiders, and the number of shares owned by each insider. After filing, the corporation must wait for the SEBI to investigate the registration statement and approve of the full disclosure.
During this period while the SEBI investigates the corporation's filings, the underwriter will try to increase demand for the corporation's stock. Many investment banks will print "tombstone" advertisements that offer "bare-bones" information to prospective investors. The underwriter will also issue a preliminary prospectus, or "red herring", to potential investors. These red herrings include much of the information contained in the registration statement, but are incomplete and subject to change. An official summary of the corporation, or prospectus, must be issued either before or along with the actual stock offering.