What is an IPO. Share Market information and knowledge.




What is an IPO
In the last article, we learnt that – what a share market is, meaning of dividend, requirements to start share marketing, Demat account and key points of investing.


Today we will learn about the IPO. Its meaning, definition & functions along with Equity share, Depository Participant and SEBI.


What is an IPO [Initial Public Offering]?

When a private company releases its shares or stocks to the public it is called initial public offering or IPO. Limited companies list themselves in the IPO so that people can buy and sell their shares. Due to this the company’s capital gets raised and becomes financially strong.


Reason for getting IPO?

When a company’s financial status is low then it enters in IPO, they also enter when there is a shortage of money to raise capital. Instead of getting a loan from the market, IPO is a better and convenient option for the company to raise its capital and stabilize their financial status. It’s the expansion plan of any company.


SEBIs the notion on IPO.

SEBI is a government regulator. It makes all the IPO listed company abide by the rules and regulation of IPO and share marketing by preventing thefts and frauds. All the IPO listed companies are bound to obey and share the corrective information with SEBI respectively. It is mandatory to submit all the trading related information to SEBI. SEBI also has the power and authority to inspect the company in order to cross verify whether the information submitted by the respective company is correct or not.




What is an Equity Share?

As we all know share means part of something big and an equity share means part of the company’s huge capital which is released by the company. Equity share is also known as common share represents the part ownership in which the shareholder undertakes the maximum risk associated with the company. In simple terms, it is a general share which you can buy and sell through your depository participant or DP in the share market.
There are also various types of shares out of which equity share is most common and also if you are planning to trade in share market you’ll only deal in equity shares.





What is a DP or depository participant?

A depository participant or DP is an intermediary between the depository and the investor. For example, you are buying a share of the particular company then that means you are putting your money in that company or investing in that company than you become the investor and when you buy shares it is held in your Demat account in electronic form that means you deposited your share in your Demat account so that account is the depository. Now a DP is an entity or a person who takes your money and goes to buy shares as per your instruction and returns with shares to keep or to held in your Demat account.
You can also consider a DP as an agent or a broker between you and the market. There are various brokers who trade with the help of a broker. Personally speaking, Zerodha is one and only broker which fits in all common man’s budget as I am trading with them too. [It’s not an advertisement, it’s a fact].




What is SEBI?

Securities and Exchange Board of India or SEBI is the department who keeps all the IPO listed companies and a share trader in check to prevent the malpractices from occurring in the share market which directly impacts the common people as their money is invested in the company.
SEBI was established on the 12th of April, 1992.
In short SEBI like a Police department in share marketing. Traffic police control traffic and local police control the locality and SEBI controls the share market thefts.




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