The process involves significant due diligence, advertising, and regulatory compliance efforts. The public buying the newly offered shares includes both retail and institutional investors, while those selling the shares include promoters and initial investors of the company.

What is an Initial Public Offering (IPO)?

In an Initial Public Offering, a private company or corporation sells a portion of its stake to an investor in order to become public. The purpose of an IPO is to infuse new equity capital into the firm, facilitate easy trading of existing assets, raise future capital or monetize stakeholder investments.

A prospectus describing the first sale of shares is available to institutional investors, high net worth individuals, and the public. A prospectus describes the upcoming IPO details. Once the IPO has been completed, the firm’s shares will be listed on the open market. A minimum free float is imposed on the shares by the stock exchange, both in absolute amount and as a percentage of the total share capital.

How Does an IPO Work?

When a company decides to sell its shares on a stock exchange, it begins the IPO process. After that, an audit must be conducted, taking into account all aspects of the company’s financials. If everything is in order, the company has to prepare a registration statement and file it with SECP (Securities and Exchange Commission of Pakistan).

Following that, the stock exchange that the company wants to list on will review the application, and it will either be accepted or rejected. For IPO listing, the underwriter helps the company on how many shares to issue and at what price if it is approved. Underwriters are usually banks, and their job is to start a book building process to find investors to subscribe to the IPO. Shareholders will receive a prospectus containing information about the shares, where they’ll be listed and the potential opening price. As part of the IPO, non-private investors have the opportunity to purchase shares of the company in a primary market. Before, only institutional investors were able to participate fully in IPOs, while retail investors could only participate in the secondary market when shares were exchanged.

Who is Eligible to Apply for an IPO?

To apply for an Initial Public Offering (IPO) in Pakistan, investors must meet the following eligibility criteria:

• Age Requirement
  You must be an adult, i.e., 18 years of age or older.
• CDC Sub-Account
  A CDC Sub-Account is mandatory to apply for IPO shares. If you plan to sell your shares post-listing, a trading account is also required. It is recommended to open both accounts together for seamless transactions.
• Bank Account in Pakistan
  Investors must have a Pakistani bank account for payment and refund purposes during the IPO process.
• Valid CNIC
  A Computerized National Identity Card (CNIC) issued by NADRA is required. It serves as essential proof of identity and is mandatory for IPO eligibility.