What are the different types of IPOs issued?

When a company decides to go public, it doesn’t follow a single path. There are several types of IPO issues, and understanding these can help investors choose which offerings align best with their investment strategy. The two primary models are fixed price IPOs and book building IPOs, and each works quite differently.

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In a fixed price IPO, the company sets a specific price at which its shares will be offered to the public. Investors know this price in advance and can decide whether or not to apply based on that figure. The demand is revealed only after the issue closes, as applications and payments are collected during the bidding period. This model offers simplicity and transparency but doesn’t always reflect real time market sentiment.

On the other hand, a book building IPO provides more flexibility and market driven pricing. Here, the company and its underwriters announce a price band, a minimum and maximum price, allowing investors to bid within that range. The final issue price is determined after assessing all bids and investor demand. This method is now the preferred approach globally because it helps discover a fair price while reflecting true market interest.

Besides the pricing strategies, there are certain types of IPOs depending on the investors. Generally qualified institutional buyers (QIBs), non institutional investors (HNIs), and retail individual investors are the three main categories of IPOs. Each category is assigned a specific amount of shares to prevent any group's monopolization of shares. There are also SMEs IPOs that are issued for small and medium enterprises that will allow the investors to enter into high growth smaller companies.

Understanding the types of IPO issues explained above is crucial before applying. Fixed price issues suit those who prefer clarity and simplicity, while book building issues appeal to investors seeking dynamic market participation.

Ultimately, knowing the differences between fixed price vs book building IPO models allows investors to plan their bids effectively and assess potential value before committing funds. By learning the categories of IPO offerings, investors can better navigate opportunities, diversify their portfolios, and participate more confidently in public markets.