In the dynamic world of the stock market, terms like Closed IPO and Current IPO often come up, especially among retail investors keen on getting early access to promising companies. While both terms revolve around Initial Public Offerings (IPOs), their implications for investors can be quite different. Understanding what each means can help you make more informed decisions when participating in IPOs.
What Is a Closed IPO?
A Closed IPO refers to an initial public offering that is no longer open for subscription. This means the company has already closed the window for accepting bids from investors. Once an IPO is closed, investors can no longer apply for shares through the IPO allotment process. Instead, those interested in investing must wait until the company gets listed on the stock exchange, where shares are traded in the secondary market.
Closed IPOs typically generate buzz in the days leading up to their listing, especially if they were oversubscribed or come from high-growth sectors. For example, if a tech startup with strong fundamentals launches an IPO that closes with high demand, the listing day often sees significant price action, either upward or downward, based on investor sentiment.
What Is a Current IPO?
A Current IPO, on the other hand, refers to an IPO that is still open for subscription. This is the period when investors—both retail and institutional—can apply for shares at the offer price decided by the company and its underwriters. These IPOs are typically listed on stock exchanges like NSE or BSE in India after the closing date and finalization of the allotment process.
As an investor, the current IPO stage is your opportunity to apply for shares at the offer price, potentially securing a foothold in a company before it starts trading publicly. However, it’s important to research the company’s financials, future potential, and risks before applying, as not every IPO leads to big gains.
Why It Matters
For investors, distinguishing between a Closed IPO and a Current IPO is crucial. Applying for a current IPO allows you to buy shares directly from the company at the offer price, which may be lower than the eventual market price after listing. Once the IPO is closed, you’re at the mercy of market volatility and investor sentiment, which can push the share price up or down.
Moreover, understanding whether an IPO is open or closed helps with planning. If you miss applying during the current IPO phase, you might have to reassess your investment strategy for buying shares post-listing.
Final Thoughts
Closed IPOs and current IPOs are two stages of the same process, but they offer different opportunities and risks. A closed IPO signals the end of the direct subscription period, while a current IPO presents a time-sensitive chance to get in early. As with any investment decision, doing your homework and understanding the company’s potential can go a long way in building a healthy portfolio.