What Is An Initial Public Offering (IPO)? How To Subscribe To An IPO?

​Everything you need to know about IPO.

What is an IPO?

An Initial Public Offering (IPO) is a process in which a company sells its shares of ownership to the public for the first time.

Through an IPO, a company shifts from being privately owned to publicly traded and owned by institutional and retail investors. Hence, when a company files an IPO, it is also called “Market Debut Or Going Public.”

To know more about Initial Public Offerings, you can read my separate blog post: Tips and Benefits of Investing in Initial Public Offerings (IPOs).

Why do most companies sell shares of stock?

Companies opt to sell a stock for a number of reasons. The main reason is financial leverage.

Financial leverage is using borrowed money to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. Companies sell shares in their business to raise money. They then use that money for various initiatives: A company might use the money raised from a stock offering to fund new products or product lines, invest in growth, expand their operations, or pay off debt.

So, how do I subscribe to an IPO?

There are two ways you can subscribe to an IPO.

Through Stockbroker

If you already have a stockbroker, you can subscribe directly to an IPO through them. If you don't have a stockbroker yet, did you know that for only PHP 1,000 to PHP 5,000 you can now open a stock trading account? With the help of an accredited online trading broker, you can start to participate in the Philippine Stock Market. For the complete list of stockbrokers, visit https://www.pse.com.ph/

Through PSE EASy

PSE makes it easier for small investors to buy IPO shares. The Philippine Stock Exchange (PSE) has launched PSE EASy—an online Initial Public Offering (IPO) subscription platform that allows you to order IPOs through the Local Small Investor (LSI) program in a more convenient way.

With just a one-time setup, you can participate online every time there’s an IPO, and order up to PHP 100,000 worth of IPO shares. You also have a better chance of getting IPO shares this way, since 10% of each IPO is allotted to the LSI program.

​To know more about PSE EASy, you can read my separate blog post: How to Create a PSE EASy Account