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What is an IPO?

An IPO (Initial Public Offering) is when a company makes their shares tradable on a stock exchange for the first time. 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 can find all IPO's in Nordea Investor.

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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. 

What is in it for me?

The benefit of investing in an IPO is that you are able to buy it in the first stage of the listing. Generally speaking the price you pay for each share in the IPO is lower than the initial price of the share first day of trading. You can say that you receive a “discount” when attending in an IPO. If the share price increases over time it is better that you bought your shares at a lower price.

What risks are there?

When investing in an IPO you should understand what you are investing in. What are the future estimates for the company? What is the reason behind the IPO? There is no guarantee that a new listed company will make profit in the short run. The share price can also decrease after the listing.

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