What is IPO?

The Magic of IPOs in Nepal:
 A Beginner’s Guide

Imagine you’re at your favorite coffee spot, sipping on a warm cup, and a friend excitedly tells you about a golden opportunity—owning a piece of a growing company. That’s exactly what an Initial Public Offering (IPO) is all about, and today, we’re breaking it down in the simplest way possible.

What is an IPO?

An IPO is when a private company offers its shares to the public for the very first time. Before going public, only a select group of investors and insiders own the company. But once it “goes public,” anyone can buy a stake and become a partial owner. Think of it as joining an exclusive club that’s excited about the company’s future!

Why Do Companies Launch IPOs?

Companies choose to go public for several reasons:

  • Raising Capital: Businesses need funds to expand, develop new products, or even settle debts. IPOs provide a significant financial boost.

  • Building Trust and Credibility: Getting listed on the stock exchange enhances a company’s reputation, as it must meet strict regulatory standards.

  • Providing Liquidity: Early investors and founders can sell their shares, while new investors get a chance to buy in.

The IPO Process Explained

Here’s how it all works, step by step:

  1. Decision to Go Public: The company decides it’s time to expand and invites public investors.

  2. Regulatory Approval: In Nepal, companies must get approval from SEBON (Securities Board of Nepal) before issuing shares.

  3. Prospectus Preparation: A detailed document is prepared, covering the company’s business model, financials, and future plans.

  4. IPO Launch (Primary Market): Investors apply to buy shares at a set price before trading begins.

  5. Share Allotment: If demand exceeds supply, a lottery system may decide who gets shares.

  6. Listing on the Stock Exchange (Secondary Market): After allotment, shares start trading on NEPSE (Nepal Stock Exchange).

Primary vs. Secondary Market

The primary market is where companies raise money by selling shares directly to investors during the IPO. Once the IPO is complete, the secondary market takes over. This is where investors trade shares with each other—buying and selling based on market conditions.

How to Apply for an IPO in Nepal

Thinking about investing in an IPO? Here’s how to get started:

  1. Open a Demat Account: This is like a digital locker for your shares. Banks and brokerage firms offer this service.

  2. Set Up a Mero Share Account: This online platform allows you to apply for IPOs and manage your portfolio.

  3. Stay Updated: Check SEBON announcements or your bank’s app for upcoming IPOs.

  4. Apply via Mero Share: Select the IPO, fill in your details, and submit your application.

  5. Share Allotment: If the IPO is popular, shares might be distributed via a lottery.

  6. Trading Begins: Once shares are listed on NEPSE, you can choose to hold or sell them based on market trends.

When to Sell Your IPO Shares

After your shares are listed, you may wonder whether to sell or hold. If the price surges on the first day, some investors sell to lock in profits. Others hold on, betting on long-term growth. Your decision should align with your financial goals and risk appetite.

Diversify for Long-Term Success

A solid investment strategy involves spreading risk across different sectors. By diversifying your portfolio, you’re not putting all your eggs in one basket, which helps maintain stability during market fluctuations.

Final Thoughts

Understanding IPOs and how they transition from the primary to the secondary market is key to making informed investment decisions. Whether you’re a beginner or an experienced investor, keeping a diversified approach will help you navigate market ups and downs with confidence.

Happy investing! 



Comments

Post a Comment

Popular posts from this blog

fundamental analysis and Technical analysis of stock in share market.

Image
FUNDAMENTAL ANALYSIS: Investing without knowing anything about the company does not mean a good and safe investment. Nobody wants to lose their capital in stock market because the aim of investing on stock is to gain profit. Every investors must have strong  reason before investing in any stock to feel safe. The process of finding the details and strong reason of investment in any stock is fundamental analysis. every investor should have to research about  the fundamental situation of the stock before he/she invest. This is the important factor that helps an investor to take right decision on choosing the stock  for both long term and short term investment.  As fundamental analysis is a research, the different types of qualitative and quantitative  factors are measure and discussed.  company's fundamental conditions are evaluated by investors before investment and those evaluation process is fundamental analysis of stocks and securities. The real value of a...
Read more

Share market basics ( stock market Nepal)

Image
What is share market? Share Market is a platform where securities are exchange from one to another. here security means, stock  or let's say ownership of related companies. In share market, the ownership is trade on the basics of quantity. The more quantity you grab, the more security you have.  Market have its fixed time to open and close, between that time the buying and selling process continues by investors. This process of selling and buying of stock is share market or Stock market. Stock market is not only supposed to exchange the shares, having partial ownership or having the source of income through trading of different stocks and market or lets say for business raise capital, in this age, it has been the signs of whole economic wealth of respective company as well as it shows the economic wealth of whole country.  Factors that affects the Stock market: Political Stability and economy Foreign institution investor Domestic institution investor Supply and demand on ...
Read more