In an Initial Public Offering (IPO) a company sells its shares to investors in order to raise money. As a retail investor, you can apply for an IPO from the primary market in order to get the shares offered by the company. Once the shares get listed on the secondary market, you can sell your shares provided you have received an allotment in the primary issue.
What is an IPO?
An IPO or Initial Public Offering is when an unlisted company gets listed on the Indian stock exchanges such as NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). Historically, companies go public when they want to raise fresh capital for the company or when the existing shareholders want to sell their stake. Either way, retail investors have two ways to get shares in an IPO.
1. Pre IPO shares- Shares purchased before the IPO
2. Apply for the shares in the IPO.
The terms for selling in both these cases are different. Let’s look at if you could sell the IPO shares quickly.
Can we sell the IPO shares immediately?
As discussed earlier, there are two ways to obtain the shares of a company. It includes either buying it before the IPO through private placement companies or through ESOPS or applying in the primary market at the time of the IPO. Hence the answer to the question, “Can you sell the shares immediately?” is a Yes and No.
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If you have purchased or acquired the shares before the IPO, then there is a lock-in period of 1 year. You cannot sell your shares until the lock-in period of 1 year is removed. Hence, you cannot sell your shares on the date of listing.
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In the second case, if you apply for an IPO through the primary offer and receive the allotment. You are the owners of the shares. In such a case you can immediately sell your shares right from the moment the stock gets listed on the Indian stock exchange. There is no lock-in period for shares bought in an IPO.
Conclusion
As most retail investors get the shares through an IPO, the first scenario would not be relevant for the majority of investors. Therefore, Yes, you can sell your IPO shares immediately after the stock gets listed. There are no restrictions related to that.
If you have applied for an IPO and received an allotment for the same, you can undoubtedly sell the shares on the date of listing. However, if the shares list at a premium (Above issue price), you can sell the majority of the shares at a profit and hold on to some of the remaining, for the long run. Whereas, if the IPO lists at a discount to the issue price, you can book the loss and look for a better opportunity to re-enter at a lower price.
IPO or Initial Public Offering is a way through which a company raises capital by giving its shares to the public. A IPO after getting listed on the exchanges can be traded by investors. The shares can be sold directly on the day of the listing since the shares have already been allotted to the investors.
An IPO, or initial public offering, is when a company makes its stock available for purchase by the general public for the first time. There are many benefits of investing in an IPO, but there are also risks involved. Therefore, if you are making a profit on the listing day, it is wise to close out 50% of your positions that day, with the remaining 50% being held for the future.
With the surge in start up scene in India, and many start ups getting listed, IPOs are in vogue now. They all come with a hype, so reports suggest that selling them once they come out in secondary market is a good way to make profits.
Absolutely. Yes, you can sell IPO shares immediately after allotment, but only once they are listed on the stock exchange. You cannot sell them between allotment and listing.
Step-by-Step Process
Check IPO Allotment
Check demat credit
Wait for listing day
Place sell order immediately
Order execution
Receive sale proceeds
This is the whole process, thankyou
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Yes, IPO shares can be sold immediately, but only after they get listed on the stock exchange.
When I first learned about IPOs, I thought we could sell right after allotment, but that’s not true. After allotment, the shares are credited to our Demat account.
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