Getting started

What is an IPO?

In an initial public offering, or IPO, shares are sold ahead of a listing on the stock exchange. By listing or going public, the firm sells new shares to raise cash.

An investment bank is engaged to manage the IPO issue. Its job is to advise the listing aspirant on its valuation, the number of shares to be issued and the pricng of the new shares. It may take up an underwriting role. This means buying up all the IPO shares if the issue is not fully taken up by the investing public.

Subscribing to an IPO

IPO shares are sold during a subscription period, which typically lasts about a week. Some IPOs are so hot that they are heavily oversubscribed and balloting is needed for an equitable allocation of shares to all applicants.

Subsequent offerings

Once the firm is listed, it may sometimes need to raise fresh capital by selling additional new shares. This may be done through stockbrokers or via banks' ATMs on a first come, first served basis.

The latter arrangement has annoyed some investors who were unable to obtain any shares as they were snapped up in mere minutes.

This has resulted in a spate of letters to The Straits Times' Forum page, written by unhappy investors who were unable to get a slice of the secondary placements.