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IPO ( Initial Public Offering )

How Share price is calculated?

 When a company offers its shares for the first time in the market, It is generally termed as “IPO” i.e. Initial Public Offering. This sharing is directly made with the investors through direct transaction.

 In this process, the company collects money from the public or investors and offers them partnership shares. This process does not involve stock market as an intermediate as it is getting done for the first time in the market. A company with the help of investment bank decides the share price in Initial Public Offering.

 After that the IPO remains open for around 3-10 days and within this time period, investors generally have to subscribe to the company shares. After this step, share distribution of shares is made among the successful investors according to the proportion of their investment.

 After this first time offering and initial transactions, investors then wait for the company to get listed on the stock market and that is when the Stock market’s actual role starts. Here in IPO, investors can only buy the shares and cannot sell them as the company is not listed on the Stock Market.

 They can sell the shares only after the company gets listed on the stock market. Once the company gets listed on the on the stock market, the exchange of the shares is done in between the investors and company does not get involved within these transaction of shares.

 Those who want to buy any company shares, they can buy those from other investors of that company and the ownership of those shares will be transferred as well. This process is done on the Stock market platform.

 In short, what stock market does is that it collaborates the buyers and sellers of shares and switches the ownership in between them. Stock market does make use of automatic order matching to match the buyer and seller requirement and once it is matched, it proceeds with transaction process of share transfer in between the investors.

 Whether you buy shares on IPO (Initial Public Offering) or on stock exchange, you need to have a Demat account which manages these share transaction. This can be done via share brokers available in the market such as Sharekhan, Moneycontrol etc.

 Firms like sharekhan acts as mediator for buying and selling of shares on the stock market and the process of buying, selling and ownership switching is done on their platforms. For this to be carried out, firms like sharekhan charge for the brokerage value for your each transaction.

 Demat account keeps track of your bought shares just like your savings account takes care of your money. All the shares you bought from the stock market usually get stored in the Demat Account.

 Along with Demat account, you get trading account as well by which you can buy or sell shares on the stock market. You do not need to open trading account separately as it comes along with when you open a Demat account.

 In order to open a Demat account, you need to provide your identity documents such as voting card, aadhar card, Passport, Bank Account statements etc.

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