When we study about an IPO, we come across a lot of terms related to it. but we don’t mind them usually. we just note the basic details like price band, dates, etc. only. but all these terms are very important. also, it is very important to know the IPO Glossary. as an investor and stock market enthusiast we must know all these terms and its meanings.
Also read: What is Initial Public Offering(IPO)
IPO Glossary
Knowing IPO Glossary is very important. we may not subscribe to each and every IPO. but as an investor, we must understand all the terms related to the IPO. The following are some important terms related to the IPO and its meanings.
Allottee: Allottee is the person to whom an allotment is made.
Allocation: the amount of stock in an initial public offering (IPO) that is sold to a customer
Amendment: additional registration document that is filing by the issuer with the SEC that has additional information regarding the proposed offering for that company
ADRs( American Depositary Receipts): securities offered by non-U.S. companies who want to list on an American exchange; each ADR represents a certain number of a company’s regular shares.
Anchor Investor: A Qualified Institutional Buyer(QIB), applying in an IPO under the Anchor Investor Portion and who has Bid for an amount of at least ₹10 Crore.
Anchor Investor Bid/Offer period: One Working Day prior to the Bid/Offer Opening Date.
ASBA: ASBA (Application Supported by Blocked Amount) is a way to apply in IPO by simply blocking the fund in the bank account.
Anchor Investor portion: Up to 60% of the QIB Portion.
Add-on offering: when a publicly traded company issues additional shares to the public.
Basis of allotment: Basis of Allotment is a document containing the basics on which Equity Shares are allotting to the successful bidders.
Bid: Bid represents the price at which someone is willing to buy shares in IPO.
Bid lot: An IPO Bid-Lot is the number of shares which have to be applied for an investor.
Bid/offer opening date: First day on which the IPO issue is open to the public for bidding.
Bid/offer closing date: Last day on which the IPO issue is closing to the public for bidding.
BRLM: BRLM(Book Reading Lead Manager) is a financial institution who work as a lead coordinator in IPO process.
Brokerage fee: A brokerage fee is the fee that is charging by a broker for executing a transaction.
Book: list of all indications of interest for a new issue offering put together by the lead underwriter.
Calendar: refers to upcoming IPOs and secondary offerings; Fidelity maintains equity, bond, and municipal calendars.
Cancellation: when an IPO or secondary issue has difficulty getting investor interest to raise the desired capital, the company issuing the shares may cancel the offering in favor of some other form of financing.
Cooling off period: time period, usually about 20 days, between the filing of the registration statement with the Securities and Exchange Commission (SEC) and the offer of those securities to the public
Cut-off price: IPO Cut-off price is the share price fixing by the company based in the demand of IPO shares.
Draft prospectus: A draft prospectus is a first legal document that a company files to SEBI prior to proceeding with an initial public offering (IPO).
Effective date: the day a newly registering security can be offer for sale.
Firm commitment: an arrangement by investment bankers to make outright purchases from the issuer of securities to offer to the public.
Flipper: an investor who has acquired shares of an IPO at its offering price and sells it immediately—which Fidelity currently defines as within 15 calendar days following pricing.
Floor price: The lowest price of the price band is the floor price.
IPO (Initial Public Offering): An IPO is the first time sale of company shares to the public. Company’s go to the public to raise funds. Once IPO shares allocated, they start trading on the exchanges.
IPO working day: Except Second and fourth Saturday, Sunday or a public holiday.
Listing date: The date on which shares officially quoted on the designated stock exchange for the trade.
Lot size: Lot Size refers the total number of shares investor can buy in one transaction.
Locked up period: time period after an IPO when insiders at the newly public company are restricting by the lead underwriter from selling their shares in the secondary market.
NIB(Non-Institutional Bidders): Individual investors, NRI’s, companies, trusts, etc who bid for more than Rs 2 lakhs are known as Non-institutional bidders.
NII(Non Institutional Investors): An Investor who can bid for the value of more than ₹200000.
Offer document: IPO Offer Document contains all the relevant information about the Issuer company and IPO.
Offer price: Final price of an IPO on which a company sells its shares to investors.
Offering Date: the first day a security is publicly offering for sale.
Offering Range: price range at which the company expects to sell its stock in a public offering.
Outstanding Shares: number of shares issued by the company that is holding by the insiders and the general investing public.
Over-allotment: part of the underwriting agreement which, in the event, the offering is oversubscribed, allows the issuer to authorize additional shares (typically 15%) to be distributed by the syndicate; also called the greenshoe.
Over subscription: Oversubscription is when the demand exceeding supply in IPO subscription process
Price band: The price band of a book building IPO is the price range in which investors can bid.
Price range: price range at which the company expects to sell its stock in a public offering; also referred to as “offering range”.
Premium: if the opening price of an IPO in the secondary market is higher than its offering price, the difference would be the premium.
Revision form: Revision Form is the form which is using to revise the amount or quantity of Equity shares in IPO process.
RHP(Red Herring Prospectus): Red Herring Prospectus is SEBI approve IPO prospectus document.
RIB(Retail Individual Bidders): An Investor who cannot bid for the value of more than ₹200000.
SCSB: SCSB(Self Certified Syndicate Bank) is a bank which offers the facility of applying in IPO through the ASBA process.
SME Platform: SME platform is a trading platform offered by BSE and NSE for listing and trading of SME companies in India.
Sub Broker: Sub Brokers is a SEBI authorized person who works on behalf of trading member.
Syndicate members: Syndicate members are commercial or investment banks responsible for underwriting IPO’s.
Under writers: PO underwriters are group of representatives from investment banks.
QIB (Qualifies Institutional Buyers): Financial Institutions, Banks, FII’s and Mutual Funds who usually apply in very high quantities are called QIB’s.
Final Thoughts
When we check about an IPO online or in any app. we may come across a lot of terms that we are unaware of. so It is very important to understand the IPO Glossary. because understanding it will enhance your knowledge. even if you not subscribing to an IPO, just go through the IPO Glossary and understand the terms and its meanings. I hope this post will give you some knowledge in the IPO Glossary.
Happy Investing