An Initial Public Offer is the issue of shares of a company for the first time to the general public. When a private company changes to a public company, issuance of shares takes place. Institutional as well as retail investors can apply for the shares. A fixed face value is set for the shares and if required, the premium is charged on shares. Investment banks become the underwriters for the issue of shares. Any investor can apply for an IPO.

The investor should choose the desired company first. Analysis of the financial position of the company, its market share, its goodwill, liquidity, management, board of directors, all plays a major role in evaluating a company. The investor should also study the historical data of the company as well as must know the plans and vision of the company. Knowing the reason behind turning into a public company of company is also important. The investor can have the assistance and perspective of their broker and decide later.

The shares that are traded in the share market are already issued shares of the existing public company. IPO of the company is the first time offering of shares to the public. Another difference that can be noted is that for an investor to invest in IPO, subscription is to be applied, whereas, in the share market, the shares can be directly traded whenever the investor/trader desires.

If you participate in an IPO and purchase shares, you become a shareholder of the firm. As a shareholder, you have two options for financial gain: either you can sell your shares at a profit on the stock market, or you may take advantage of the dividends the firm offers on the shares you own.