What is IPOs (Initial Public Offerings)?
An Initial Public Offering (IPO) is when a privately held company sells shares to public investors and lists on a stock exchange. The process typically takes 6-12 months and involves SEC/regulator filing (S-1 in US, DRHP in India), roadshows to institutional investors, price discovery, and finally allocation and listing. Investment banks (underwriters) manage the process and earn a fee (~5-7% of proceeds).
Why it matters for investors
IPOs allow founders, employees, and early investors to monetize their stakes, while giving public investors access to growth companies. IPO performance varies wildly: some (NVIDIA, Microsoft) reward early holders with hundredfold returns; others trade below their IPO price for years. Allocations to retail investors are often small in hot deals and large in cold deals.