How is the price band determined in an IPO ?

Question

how is the price band determined in a IPO ? what is the procedure adopted in coming up with a OFFER price in an IPO ?

Answer 1

The price depends on no other factor than how much you want to cheat the stock holders or the gullible who invests to you IPO. The more the premium the higher the cheating level and lower the reputation and experience of the company. You should know the price above the par is just arbitrary and the promoters can account it off into their name anytime they want when it gets subscribed. Meaning what you pay as premium say 100 rupees above par will be accounted as promoters quota in the account and your non promoters quota will contain 10 rupees ultimately. So never subsribe to premium issues, even if you want to subsribe subscribe to bule chip offerings which usually takes in only low premium for having enough to not to cheat stock holder. All this big premium takers are all scammers and if you want to loose your hard earned wealth you go ahead.
The premium based IPO was done with good intentions then to prevent manipulation of IPO by a nexus of stock brokers and the promoter, but it turned out to be a 'buring the house to catch the Rat' situation. Many have lost money and many keep loosing and many lost their entire investments in many cases. It is a scam the earlier the government finds some othe way the better it will be.

Answer 2

In layman terms: If a company needs cash it can do a couple of things. It can borrow money from a bank, it can issue bonds (which is basically borrowing money from other people but a bank) or it can issue stock. A stock is basically a part of the company (it is equity). This means that the buyer of stock becomes one of the owners of the company. There are basically two types of companies that have sold their stock, the private and the public company. The private company has sold its stock to a select group of people, for example only relatives. Those people cannot sell their stock very easily (like on a stock exchange), hence 'private'. A public company sells its stock to anyone who is interested (and has the cash). This happens on stock exchanges. When a company wants to sell it's stock to the general public for the first time, it is called an IPO. It stands for Initial Public Offering.

Answer 3

It depends upon a number of factors. The public perception about the company is known by various means and the willingness of the competitors to have a stake is determined and if so at what price , the number of shares(%age of shareholding being made public) that are to be issued and the shareholding of the current partners are all taken into consideration.