Everyone wants in on the IPO. Do you know what you are buying?
A big stock exchange is in the news for its own IPO, reports say. Here is what an IPO really is, and what happens after you tap Apply.
Step 1 of 7 · Hook
The IPO frenzy
The Broke Squad
3 members
Dhvani
the NSE IPO is all over my feed!! i am applying for everything 😍
8:05
Dhvani
the GMP is huge. free money
8:05
Tanishq
what is a GMP. what is an IPO. why is everyone shouting
8:06
Nemi
Dhvani. What exactly are you buying?
8:07
Dhvani
a share. obviously
8:07
Nemi
And what does a share give you?
8:08
Dhvani
profit?? i think??
8:08
Nemi
Let us slow down together. Here is the real question: what is an IPO, and what do you actually get when you tap Apply?
8:09
Step 2 of 7 · Guess
Guess first
IPO. Everyone says it like they know. So what is it?
Yes. That is the whole idea. The company is the seller, and you are the buyer. Now let us see who gets the shares.
Step 3 of 7 · Build
Who gets the shares?
A share is a tiny slice of a company. If you own a share, you own a little piece of it.
Pretend Snack Co is selling 100 shares in its IPO. Who gets them? In a typical IPO, the shares are split into three groups. Tap each group to hand out its shares.
The split is typical, not fixed. Each IPO states its own split, so always check.
Big institutionsRich investorsEveryday investors
Shares handed out
Still unsold
Groups added
Now add the other two groups.
Step 4 of 7 · Concept
So what changes on IPO day?
IPO stands for Initial Public Offering. It is the first time a company offers its shares to everyone, not just a few owners.
Tap to see before and after.
A private company
Owned by
Founders and a few early investors
Can you buy it?
Not on any app
Its price
Only a few people know it
A listed company
Owned by
Anyone who buys a share, including you
Can you buy it?
Yes, on an exchange like NSE or BSE, any market day
Its price
Moves all day, like the scoreboards in Chapter 3
Its promise
It must share its results with the public
One catch. Sometimes an IPO is early owners selling their shares. Then the company itself gets no new money. Always check where the money goes.
Step 5 of 7 · Why it matters
Will you even get shares?
You can only apply for a lot, the smallest bundle allowed. Pretend one lot is 140 shares at ₹105 each, so ₹14,700. While you wait, your money is blocked in your bank, not spent.
Subscribed means how many times more shares were asked for than were offered.
Pick how popular the IPO is, then pick what happens on listing day. These are made up scenarios.
The IPO is subscribed…
On listing day the price…
Imagine 60 people apply. Gold dots get a lot. Grey dots get nothing.
About 1 in 20 people get a lot.
If you are one of the lucky ones, your ₹14,700 becomes ₹17,640.
If you are not, your blocked money simply returns to you.
Most applicants got nothing and just had their money returned. Even for the lucky ones, a listing gain is never promised.
Step 6 of 7 · Before and after
Same IPO. Two ways in.
Tap to see each way.
Follows the hype
Why apply
The GMP is high, so it must be free money
What was read
Only the GMP and a reel
How much
As much as can be blocked
Result
Gets nothing, or gets shares that nobody can explain
Reads first
What is read
The company's official document, called the prospectus
Three questions
Does it make money? Where does the money go? Is the price fair?
How much
Only what can be lost without pain
Result
Any allotment is a bonus, not a plan
GMP means grey market premium. It is an unofficial rumour price, traded outside the exchange. It is not official and it can be wrong.
Tanishq
so an IPO is not free money, it is a company asking me to buy?
9:20
Nemi
Exactly. It is a sale, and every sale has a seller with a reason.
9:20
Dhvani
i already applied 😭
9:21
Nemi
Then let us read the papers together now.
9:21
Dhvani
thank you. i just did not want to miss out
9:22
Tanishq
same. that is why i need both of you
9:22
Step 7 of 7 · Answer
Last one. What is your first move?
An IPO opens tomorrow and your feed is going wild. What do you do first?
Yes. Three questions: does it make money, where does the money go, and is the price fair.
An IPO is a company asking you to buy. Ask what you are buying.Hype tells you how loud it is. The prospectus tells you what it is.
Next chapter
Crude oil
Follow the line from an oil well far away to your petrol bill, and to the market screen.
IAMB explains money basics. This is not advice to buy or sell anything. Snack Co, the prices and the outcomes here are made up so the maths stays simple. IPO rules and splits differ, so read each IPO's official papers.
Why this topic: the NSE IPO is all over the news. See this explainer and check the official dates before you act.
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