If you are an investor with some experience, you will surely have come across the acronym IPO on more than one occasion. Well, they are those that correspond to public offers of sale and that it is a series of operations that are carried out when an owner of a large volume of shares of a company wants to sell that share package. If these movements in the financial markets are characterized by something, it is really because they move with a volume of shares above the usual and that therefore sales are made in a very orderly way, but on what is regulated. This is roughly the public offerings for sale.
Although IPOs can affect companies not listed on the equity markets, what we are going to do is those that are listed on the stock market. And that may be the object of your operations in the stock market to make profitable the savings that you wish to invest from now on. In this sense, you should remember that in IPOs the majority shareholder divests part or all of the share package that he had, and makes them available to the small and medium investor. It is then where you yourself play a fundamental role to analyze whether or not it is convenient for you to subscribe these very special operations.
It is also very useful to know that this kind of public offering has to formalize an information brochure in which the aforementioned offer is described. In which all the data that must be consulted by the plaintiffs of these operations on the stock market is revealed. As for example, number of shares offered, terms, expiration of the operation, rights to subscribe and any other information that is of great need for investors. Only in this way will you be able to check whether or not you are in a position to subscribe to the public offers of sale that are being made at all times.
IPO: something very common on the stock market
Of course, public offerings are not unusual movements in equity markets. If not, on the contrary, you will find them very frequently in all years. To the point that there are many investors who are very aware of its appearance to try to get broad benefits in these operations on the stock markets. But be very careful, because not all public offers for sale have to be profitable. Of course, this is not the scenario and do not doubt that sometimes very damaging operations can be done to defend your interests as a retail investor.
From this general scenario, in the first place you must consider how the issuance of each of the public offers of sale is. Because not all are the same, far from it, but they are governed by characteristics that are significantly different from each other. This is one of the objectives for the IPO that you are going to opt for from these precise moments. Beyond other technical considerations and maybe even from a fundamental point of view. Where the rigor in your decisions should be one of the most relevant keys for you to achieve success in this kind of operations in the equity markets.
How to underwrite an IPO
It will be one of the most important sections for small and medium investors. This is due to a compelling reason that resides in the fact that on some occasions the number of requests may exceed the total number of securities offered. Well, in these scenarios of public offers for sale, there will be no choice but to distribute the shares among the requests that have occurred during this process. This makes your demand may not be satisfied by the actions you wanted get the shares through the IPO in question. From this point of view, it can be the most damaging strategy to your interests because you will have to be subjected to a proration of the actions to achieve this operation.
On the other hand, there is another scenario that is significantly different, at least with regard to the objectives you pursue in public offers for sale. Because in effect, it is fundamentally that the requests do not reach the total of values offered. Well, in this scenario, which may happen with some frequency, the demand will be met with respect to the shares you want to acquire through this unique strategy in the equity markets. With the only variation that the rest of the requests will ultimately go to the financial insurer. In this way, it will not affect your personal interests as much as those of the other part of the process.
The value of these shares
Another very different thing is to establish what is the worth of the shares on the stock market that materialize through public offers of sale. Because this is somewhat more complex than the previous sections, as you will be able to see from now on. Why are many variables that come into play to form the real value of the shares of the securities that go through this business process. Like the following that we expose you below at this time.
- Nominal value: Of course, it is the most common of odes and is the result of dividing the capital stock by the total number of shares. Almost all stocks in the domestic continuous market use this benchmark to determine their value in financial markets.
- Book value: it is the most orthodox system to arrive at its valuation with greater reliability, although it presents other problems that will be discussed in other articles. Because in effect, this value can be obtained from an operation as simple as obtaining the difference between assets and liabilities, to divide it by the number of shares from now on. On the other hand, it is a simpler method that is within the reach of the understanding of any investor profile.
- Liquidation value: this assessment will be very effective for certain financial products, such as investment funds. At the times when you want to undo the positions to enjoy liquidity in your checking account. In these more specific cases, you will have no choice but to calculate the material assets, in this case the financial assets represented by the shares on the stock market, subtracted from the debts that exist at that time. The result that comes out of this operation is nothing more and nothing less than the value of the settlement.
Market value: more reliable
Of course, the market value is the most taken into account in public offerings for sale, more commonly known as IPOs. Well, within this scenario, this price in the shares of the stock market values is fundamentally determined by by supply and demand flows. In other words, it is the financial market itself that determines its real price at all times. As all operations in the equity markets are governed in recent years.
On the other hand, you cannot forget at this time in the process that the operations of the public offers of sale are not in doubt so that the valuation is raised in the interest of the shareholders themselves. That is to say, that they are listed on the rise, as has happened in recent years with some of the most relevant IPOs. Not surprisingly, when the listed security goes public, it generally does so with bearish results. This is due to the fact that the price of the company is adjusted excessively, something that on the other hand usually benefits the interests of small and medium investors.
Do IPOs have to subscribe?
Finally, there is the most relevant aspect of this topic of the article and that is if it is convenient to contract shares through a process of public offers for sale. Well, it all depends on what your subscription conditions. To avoid the odd problem in this regard, you will have no choice but to read all the information generated by an IPO.
Or at least, seek the services of your stock market advisor to tell you what to do on each of the occasions in which an operation of these special characteristics occurs. Because of course not in all situations you should give the same answer. To the point that some IPOs will be very interesting to go to them, while in others the opposite, you should not execute the taking of positions under any aspect.
As you may have seen, this is a very complex issue because public offers for sale are certainly not really homogeneous operations, far from it. If not, on the contrary, they depend on many variables and some of them of different nature, as you have been able to verify in this article. Where in the end it will only be you who must make the decision.