There are two main types of initial public offerings that private companies can do. An Initial Public Offering (IPO) is when a private company tries to raise money from public investors by selling shares to the public for the first time. This event gives investors their first chance to buy shares. After the IPO process is over and the company’s shares are listed on a stock exchange, the company can start trading them publicly.

There are different kinds of IPOs on the stock market, and they all serve different purposes. We will use three simple definitions to explain each type of IPO.

1. Initial Public Offering (IPO) at a Set Price

Before the IPO process starts, a company that wants to do a Fixed Price IPO has to set the price of its shares. This step is part of the initial public offering meaning, which refers to the process where a private company offers its shares to the public for the first time. Before they send in their application, investors receive the price information, and they must pay the full amount when submitting their application.

Main Features:

• Before the launch date, the share price is set.
• Investors must pay the full amount when they buy.
• People only find out about public interest after the shares have been given out.

This type is simple to understand. But it doesn’t show how much demand there is in real time during the bidding period.

2. Making an IPO

This type of IPO is still the most common way to go public these days. A Book Building IPO lets the company set its price range between two different prices. This pricing structure is called the price band.

For example, the price range could be between ₹100 and ₹110 per share. Investors place bids in this range. After the bidding period is over, the final price is set based on how much people want the item.

Main Features:

• Instead of setting a fixed price, the system uses a price range.
• The system lets investors make price offers that fall within the set price range.
• The final price is based on how much demand there is for the item.

This method helps you find the right price more easily. It shows how much people are willing to spend.

3. Offer for Sale (OFS)

When the company makes an Offer for Sale, it doesn’t issue new shares. This is how current shareholders sell their shares to the public.

Founders, early investors, and promoters are all shareholders who can sell their shares.

In this case, the business doesn’t get any new money. The people who sold their shares get the money.

Main Features:

• The company needs to make new shares in order to make an Offer for Sale.
• The system lets current shareholders sell their shares.
• This process does not give the company any extra money.

Early investors often use this method to lower their stake in a company.

4. New Issue

In a Fresh Issue, the company makes new shares and sells them to investors. The business uses the money it collects to pay off old debts, grow its operations, and start new ones.

Key Features:

• Investors get new shares from the company.
• The company keeps all the money it makes from selling shares.
• The process changes who owns what.

Most IPOs have a new issue part.

5. IPO with both

A Hybrid IPO has parts of both a Fresh Issue and an Offer for Sale. Some of the shares are brand new. The rest is sold by current shareholders.

This is the way that businesses set up their modern initial public offerings.

Key Features:

• The system lets you sell existing shares and issue new shares at the same time through an Offer for Sale.
• The process gives the company money.
• The system lets current shareholders sell their shares to the public.

The method best matches what the company needs with what investors want.

6. Direct listing

Direct Listing lets a company put its existing stock on public exchange markets without getting any extra money.

There are no new shares in the system. There are still no new financial resources.

People who already own shares can sell them directly on the market.

This method isn’t used as much in some countries, but it’s becoming more popular in global markets.

Conclusion

The process of going public is a big step for private companies. The process helps businesses get loans while also making them more visible to the public and building trust.

Companies can choose from different types of IPOs that fit their specific business needs. The company might decide to get more money while letting current investors leave the market.

If investors know what these types are, they can make better decisions. The paper also talks about how companies begin to sell their stocks on public markets.

There are different types of IPOs that can help businesses reach their goals. The business will pick a structure that works best for how it runs.