IPO fascinates most investors to earn significant returns on their investments. Many investors prefer to hold their IPO shares for the long term to see their funds growing with the company’s growth. However, one can opt for listing gains also to receive quick returns.
IPO Selling for Listing Gains
IPO share trading starts after the stock market opens on its listing day. Investors can sell the IPO shares after the market hours begin. They can earn a maximum profit on a listing day if the IPO is oversubscribed. Generally, the listing price falls below the offered price after a few years. Still, investors want to sell enough on a listing day to cover their investing costs, especially when they have used IPO financing and need to pay interest to the lender.
Long Term Gains
They can stay invested in the remaining IPO stocks in case the stock shoots up and can give good returns in the future. Suppose an investor gets the allotment of 100 shares at INR 200. The total investment would be Rs 20,000. If the stock goes up 33% on a listing day, the share price would be INR 266. Here, the investor will prefer to sell 75 of the 100 IPO shares to recover the investment cost. The remaining 25 shares can stay invested in a fundamentally strong IPO company for a longer period.
You can consider selling a few stocks every year after the announcement of the quarterly earnings reports. It also allows investors to earn considerable profits.
For example, if you have 200 IPO shares. You can sell 50 shares every quarter or after two quarters every year.
If the IPO shares are with the company’s employees, they cannot sell their stock until the lock-up period gets over. The lock-up period prevents employees from dumping all alloted stocks and depressing the share price. It can be 180 days or more as per the company policy.
Online Trading Process
Investors can buy or sell stocks online using their demat and trading accounts. Investors need to log in to their trading accounts to place trade orders on the trading platform of their brokerage firm. Once the broker receives your sell order, it will forward it to the relevant stock exchange for further processing. The exchange will find the buyer looking for the same securities in the same number. Once found, the clearinghouse of the exchange will clear the transaction. The securities will deduct from your demat account and reflected in the buyer’s demat account.
Demat Account Meaning:
A demat account is an online account with a SEBI registered stockbroker. The account is the repository for an investor’s dematerialized securities in the stock market. It can be shares, mutual fund units, commodities, derivatives, bonds, government securities etc. If the demat account holder buys securities then securities credit to a demat account debit when they sell the securities.
Trading Account Meaning:
A trading account is a gateway to the stock exchange to buy or sell securities in the comfort of your home. The broker allows individuals to access the trading platform connected to stock exchanges using a share market online trading account. This account is linked to a demat account and bank account. Traders can sell their IPO shares at the relevant stock exchange, like BSE and NSE.
You consider opening a demat and trading account with a discount broker facilitating an online IPO application. You need to log in to your demat account and choose the IPO company you want to buy. Considering the market sentiments for buying and selling the IPO stocks is inevitable. Research the company well to know your future profitability with the IPO investments.
Read also:- How Can You Reduce Your Demat Account Charges?