PUBLIC OFFERS

Types of Equity Issues in Primary Market

Initial Public Offers
Public Issue Offer for Sale

Rights Issues Follow on Public Issues

Public Issue Offer for Sale Composite Issue

Depository Receipt Issue

Public Issue Sponsored Issue

Initial Public Offer

IPO is the first public offer of securities by a company in order to seek listing on the stock exchange There are two methods of taking company public:
Public Issue which is an invitation by a company to

the public to subscribe to the securities offered through a prospectus Offer for sale of existing shares to be made by the existing shareholders to the public for subscription through an offer document .

Going Public
Every company when It is unlisted offers an ownership or equity opportunity to an outsider investor which, can be termed as a private window.
The investors who invest in an unlisted company are either the promoters or strategic long term investors or pure financial investor . The difference between a promoter, strategic investor and financial investor is in terms of the investment objective.

Going Public
A promoters primary concern is control while that of a strategic investor is business opportunity and the financial investor looks

for return on investment These investors invest through the private window that cannot offer the facility of any time entry or exit into the companys equity capital.

Going Public
When a company makes an IPO, what it actually creates is a second ownership opportunity that can be termed as the market window. The market window, unlike the private window, provides any time entry and exit facility to investors from the companys equity capital. Therefore, it is meant either for the retail investors who would wish to have instant liquidity for their investments or for speculators who intend to make profits through regular trading in the companys stock.

Going Public
In order to serve the interests of retail investors, the market window also performs the function of validating the companys worth on a continuous basis through an organized trading mechanism called the stock exchange which provides market quotes for the companys stock.
Being a continuous evaluation mechanism, the market window is market driven it can be overheated at times or be completely indifferent to the companys fundamentals.

Going Public
Unlike the market window, the private window need not be driven by the market price of a company share, though it has some

influence in its determination. A strategic investor would be prepared to pay an entry premium for the companys share, which may result in the companys share being valued at much more than its current market price.

Going Public
The premium that a strategic investor would want to pay is arrived at, based on the long term considerations that have more of a

business perspective than a pure financial perspective.

Implications of IPO
It can be a source of finance if it is meant to finance a specified end use.
It creates a new ownership opportunity called

the retail window and a class of investors called the retail investors. It can be a liquidity event since it creates an exit route for the existing and future investors of the company

Implications of IPO
It creates market capitalization for the company, which is the aggregate value of all its issued shares as multiplied by the current

market price The market capitalization of the company can act both as an enhancement or a deterrent for future fund raising by the company in the equity route Being listed can open up the gates for hostile takeover attempts on the company

Implications of IPO
It makes future acquisition of stakes in the company by the promoters quite expensive and cumbersome. It brings with additional costs of regulatory compliance, certain restrictions on future capital transactions and cumbersome procedures.
So, IPO can be a double edged sword. In good times it enhances shareholder wealth but in difficult times, listed status can become a hindrance.