Stock market is simply the exchange of the securities but to understand this definition. Some question arises in our mind is
How the company list ?
How the market runs?
How we can earn money from it?
Why it plays a major role in the economy of an country and many more things
So let’s understand that how the company list
Suppose X has started the company called ABC limited is doing business of manufacturing the clothes and the company is going well he is earning good amount annually. The business is going well after some years the owner of the business wants to expand the business. He wants to raise some money that will be helpful for the expansion of the firm so the owner decided to make his company private to the public means there will be the some contribution of the public also. After that he decided to evaluate his valuation of the company by revenues EBITDA (earning before interest tax depreciation and amortization ,net profit, market analysis of the particular product and many more. After the valuation has been made of the particular company. The owner must have to some stakes so that there will be the involvement of the public and the raise funds suppose the company has valued of 100 crores. If the owner can only loose 10 % equity then the issue size will be 10 crore rupees then after the approval of the SEBI the company launch its IPO (initial public offering). The foreign investors ,domestic, investors, institutional investors, and the retails will invest in the issue by fundamental analysis and the GMP(grey market premium). There will be investing on the lot of the issue if the issue has over subscribed means the fund which requires by the company and get more than the required fund then it will be decided by the pro rata basis in which some applications are allotted and some or not and not allotted applications get refunded. After the company listed in the market and if the issue result would be good then share would be list in premium that will increase the market capitalization of the company and shareholders profit.
How the IPO price has decided
The company valuation has 100 crores then the company on a decided a particular price for example they have decided 25 rupees
1000000000/25
40000000 shares
1 share is equal to 25rs
Show the company makes lot of it and in the main line RS 14000 to 15000 of 1 lot approximately
* NOT IN SME(SMALL MEDIUM ENTERPRISE) THE LOT SIZE OF THE COMPANY IS TO HIGH IN IT APPROXIMATELY 1 LAC TO 2 LAC OF 1 LOT