What Happens After The IPO?
Once the IPO closes, the company has to get its stocks listed on the Bombay Stock Exchange or the National Stock Exchange, or both. The market regulator, the Securities and Exchange Board of India (SEBI), has made it mandatory for a firm to list its shares within six days of the closure of the IPO.
Relationship Between IPO And Underwriters:
Sometimes, companies can sell more shares than previously agreed upon. This option is known as Greenshoe Option.
What Is Greenshoe Options?
Underwriters play a crucial role in this case. Since they work on a percentage basis, underwriters want IPOs to raise as much as capital as possible.
So, if the stock price surges, underwriters buy extra stock from the company — up to 15% — and sell it to the public at a profit. Underwriters usually buy stock at a predetermined price.
On the other hand, if the price is dipping, they buy back shares from the public. This option helps stabi-lize the pricing of the share without incurring any loss to the investors.
Listing Formalities
Once the bidding process is over, the underwriter or the investment banker checks if the issue has been oversubscribed or undersubscribed.
If it is oversubscribed, the banks release the shares at the highest price band. The share is then listed.
Verifying ASBA
SEBI has made it mandatory for all investors to pay for the shares via ASBA (Application Sup-ported by Blocked Amount). The investors have to write their bank account numbers and authorize the banks to make payment in case of allotment. The investors need to simply sign the application forms. For investors who have been allotted the shares, their accounts will be debited according to the number of shares they have been allotted. This eliminates the task of issuing refunds to investors who have been left out. But the system is not entirely foolproof. The issuing company still has to ensure that investors have not been wrongly charged. -3 weeks.
A Quick Recap
Companies are given six days to get listed on the stock exchanges once the IPO is over.
But the system is not entirely foolproof. The issuing company still has to ensure that investors have not been wrongly charged. -3 weeks.
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