Stock sales and initial public offering profitability

The initial public offering promotes the stock market and economic development while preserving the interests of investors. In fact, it provides a win-win situation.

Of course, this does not mean that investors should have the newly offered shares in their portfolio for an indefinite period of time.

To know the best time to sell a stock, you need to consider a few things

The initial public offering promotes the stock market and economic development while preserving the interests of investors. In fact, it provides a win-win situation. Of course, this does not mean that investors should have the newly offered shares in their portfolio for an indefinite period of time. Theoretically, based on what is common in the world, the selling price of the initial public offering is determined in such a way that participants can benefit from a return of 10 to 20 percent. In fact, it is impossible to say for sure when the first offer will be sold. Because it depends on various factors such as your need for liquidity from this offer, buying the first offer on credit from the broker and as a result settling the bill with it and things like that. Shareholders can sell their shares from the day after the listing. But to know the best time to sell a stock, you need to consider a few things:

• Assess the current and future status of the company listed on the stock market
• Paying attention to the size of the company offered in the stock market
• Study of fundamental analysis of initial public offering shares on analytics sites and news channels of brokerages
• Investigating the behavior of major shareholders in the days of stock trading after the first offering 
• Review the current trend of the stock market 

The stock market, like any other economic activity, experiences different periods of recession, growth, boom, and finally decline. This cycle occurs consecutively over time. If a company's stock is offered during a downturn or downturn, the demand for first supply usually falls due to capital outflows. In such a situation, due to the negative atmosphere in the market, the number of positive days in the initial public offering will be lower than during the boom. But in a time of boom and bust, the opposite is true. Due to the large amount of liquidity in the market, there is usually a strong demand for stocks. Eventually, this can lead to heavy buying queues for a while.

One of the most important signs that a new entrant is leaving the market is the dismantling of the buying queues. Because a large number of shareholders make a purchase on the first day of a public offering, a limited number of shares are awarded to each trading code. So shareholders will buy the shares in the coming days. This allows the purchase queue to be formed on a daily basis. The major shareholder of the company may be able to shorten the buying queue by offering a share, but this queue will be formed again. When there is no longer a buy queue for the stock and it reaches equilibrium, it can be considered a sign for sale.

✔ The first offer is not always profitable !

We said that in most cases, the first offer is profitable for investors. But sometimes buying a stock in the initial public offering can be to your detriment. The stock market has witnessed several examples of initial public offerings, which after the offering, not only did not grow much, but also fell in price. There are various reasons for this price drop. For example, the share price at the time of the first offering was not much different from the real value of the share or the share was offered when the general market conditions were not suitable. So do not let the belief that these shares are profitable prevent you from carefully reviewing before buying.

The purpose of the initial release

There are many incentives to sell a company's stock. Small companies usually enter the stock market with the aim of raising capital. Another incentive to offer is privatization. Large companies such as Telecommunications, Mobarakeh Steel and Iran Khodro were state-owned. That is, the profits from the activities of these companies went to the government. After being listed on the stock exchange, stock buyers become the owners of some of these companies and profit from their business.

Terms of purchase of shares in the initial public offering

In purchasing the initial public offering, the price and volume cannot be entered into the trading system as desired. Rather, every initial supply has conditions. For example, in the initial public offering of company  x, the  volume considered by each real and legal investor is 500 shares and the price range is in the range of y to z.

Now the investor can enter a maximum of 500 shares in the system, and if he enters 1 more share in the trading system, he will face an error and it is not possible to buy the initial public offering. On the other hand, some initial offerings may require a lot of liquidity due to the large size of the company and the investor may not be able to provide it for any reason. For this reason, in this case, it can enter a smaller number of shares to buy in the trading system, and due to the observance of the ceiling, the order will not encounter an error.

Pricing in the initial supply

When it launches, analysts review it and evaluate the company in terms of price. They realize that, for example, the price of each share of this company is worth 500 Tomans, but the stock exchange organization announces a lower price because it intends to welcome this offer. The company itself knows these analyzes about its own stock price.

Basically, in order to welcome their company's stock offering, they are also willing to sell their stock price a little lower than their real value. Therefore, the initial public offering is usually done at a price lower than the intrinsic value of the share. That's why so many people are willing to buy the stock. The company sells a portion of its shares ( 5 or 10 %) . In the following days, more and more shares will be offered. Applicants line up to buy this amount more. The same process increases the share price. In fact, on the trading day after the initial public offering, a purchase queue is formed for the shares of the offered company. This means that the price is within its maximum range ( ie positive 5 %) Arrives and a large number of orders are registered to buy shares. This is the price increase of a win-win game.

Early investors benefit from their investment. The company also makes more money by selling more shares at a higher price. The priority of buying stocks in the buying queue is with those who sent their order earlier. A few seconds delay can also cause the stock buyer to not have a good position in the buying queue. In the case of initial public offerings, the number of orders sent is very large and in a fraction of a second thousands of orders are sent to the core of stock exchange transactions.

Initial supply profit

In most cases, the initial public offering is profitable because the number of shares is limited and many buyers are willing to participate in the business of new companies. The formation of a buying queue for corporate stocks is one of the main reasons for the price increase. In most cases, investors make a profit of between 20 and 30 percent in a short period of time. However, the amount of this profit is not so great. The purchase price of most initial public offerings is small, and given the limit on the number of shares to be bought in the initial public offering, even if 50% is their initial profit and the dividends go to the shareholders, a small amount goes to the shareholders. .

Initial offering, first stock experience

The first investment experience of many people in the Tehran Stock Exchange is usually "not necessarily" buying the initial public offering, which turns into a sweet experience. Because each company is offered, it is usually a queue for a few days, and we usually see a 5% increase in the value of the shares of these companies. But this does not mean that the initial supply always brings profit. In some cases, due to high pricing, buyers sell their shares as soon as they buy. In this case, those who have kept their share will suffer losses. In the secondary market, the price may also be lower than the price discovered at the time of the initial public offering. That is why we say that buying stocks from the primary market is not a " completely risk-free " investment .

Know more

• Familiarity with the purchase and profitability of the initial public offering

• Selling shares of the initial public offering and the book building method