What is an IPO and how does it work?
An IPO (Initial Public Offering) is when a company makes their shares tradable on a stock exchange for the first time. Reasons to go public could be that the company needs to raise capital, pay debts, or to improve their image. The company, together with an Investment Bank, decides how many of its shares they want to offer and the Bank suggests an initial price of the shares when listed. They also create all legal documents like prospectus and accounting documents for all potential investors. The prospectus needs approval from competent authority, which depends on the company’s domicile, usually the local FSA.
Please note you might not receive all shares you signed for
If you want to invest in an IPO you subscribe (an indication of interest) for a specific number of shares to sign up for. You are not guaranteed to receive all the shares that you have subscribed for. Depending on the demand of the IPO the company might for example offer 70% of the amount of shares each investor has applied for.