50
Most Important
IPO Terminologies
“that are essential to be familiar with before
investing into any IPO”
RISHABH SACHAN
1. IPO (Initial Public Offering): The first sale of a company's
stock to the public.
2. Prospectus: A legal document providing details about the
company, its financials, and the securities being offered.
3. Underwriting: The process by which investment banks
commit to selling a certain number of shares and assume the
risk of not being able to sell them.
4. Lead Underwriter: The primary investment bank managing
the IPO process.
5. Book Building: Determining the IPO price by collecting and
considering investor demand for shares.
6. Green Shoe Option (Over-Allotment Option): A provision
allowing underwriters to sell additional shares if demand
exceeds the original offering.
7. Lock-Up Period: A period during which insiders and early
investors are restricted from selling their shares.
8. Roadshow: Presentations by company executives to potential
investors to generate interest in the IPO.
9. Offering Price: The price at which shares are initially offered to
the public during the IPO.
10. Allotment: The process of allocating shares to investors who
participated in the IPO.
11. Listing: The process of a company's shares being officially
traded on a stock exchange.
12. Quiet Period: A period during which the company is restricted
from making public statements.
13. Market Capitalization: The total value of a company's
outstanding shares.
14. Dilution: Reduction in existing shareholders' ownership
percentage due to the issuance of new shares.
15. Offering Size: The total value of shares offered for sale in the
IPO.
16. Underwriting Spread: The difference between the public
offering price and the amount underwriters pay to the issuing
company.
17. Custodian: A financial institution responsible for holding and
safeguarding securities on behalf of investors.
18. Over-Subscription: When demand for shares in an IPO
exceeds the number of shares offered.
19. Stabilization: Actions taken by underwriters to prevent
newly issued shares from trading below the IPO price.
20. Market Maker: A firm that facilitates the trading of a
company's shares on the stock exchange by providing liquidity.
21. Shareholder Value: The value delivered to shareholders
through stock price appreciation and dividends.
22. Lead Manager: The main investment bank managing the
IPO process.
23. Red Herring Prospectus: A preliminary prospectus with
incomplete details, used before the final prospectus is available.
24. Issue Date: The date on which the IPO shares are made
available for public trading.
25. Offer for Sale (OFS): A method of selling shares in which
existing shareholders sell their holdings to the public.
26. Grey Market: Unofficial trading of IPO shares before the
official listing.
27. Public Float: The portion of a company's outstanding shares
available for trading by the public.
28. EPS (Earnings Per Share): A company's net earnings divided
by its number of outstanding shares.
29. Market Order: An order to buy or sell a security immediately
at the current market price.
30. Allocation: The process of distributing shares among
investors during an IPO.
31. Vesting Period: The period during which employees must
wait before exercising stock options.
32. Benchmarking: Comparing a company's financial
performance to industry standards or competitors.
33. Share Buyback: When a company repurchases its own
shares on the open market.
34. Cornerstone Investor: A strategic investor who agrees to buy
a significant portion of the IPO shares.
35. Bull Market: A market characterized by rising prices.
36. Bear Market: A market characterized by falling prices.
37. Market Overhang: The potential selling pressure on a stock due
to a large number of outstanding stock options.
38. Convertible Securities: Securities that can be converted into
common stock.
39. Lead Broker Dealer: The primary broker responsible for
executing orders in the market.
40. Secondary Offering: The sale of additional shares by a
company that has already gone public.
41. Sponsor: The financial institution leading and managing the
IPO.
42. Rights Issue: The offering of additional shares to existing
shareholders at a discount.
43. Grey Market Premium (GMP): The difference between the
unofficial and official listing prices in the grey market.
44. Registrar: A company responsible for maintaining the record of
shareholders.
45. Circuit Breaker: Temporary halting of trading in a security to
prevent excessive price volatility.
46. Day One Price: The closing price of a stock on its first day of
trading.
47. Issue Management: The overall coordination and management
of the IPO process.
48. Subscription Rate: The ratio of the number of shares
subscribed to the total shares offered.
49. Price Band: The range within which investors can bid for
shares in a book-built IPO.
50. SME IPO: Initial Public Offering of shares by Small and Medium
Enterprises.