Important IPO information that investors need to know

If you are considering entering the stock market, the term IPO may be something you hear frequently. But if asked what ipo คือ (what is an IPO) really means, many people might still not fully understand. This article will explain in detail about IPOs, including definitions, advantages and disadvantages, how to subscribe to shares, and the necessary steps to help you make informed investment decisions.

Clear Definition of IPO

IPO stands for Initial Public Offering, which in Thai means the first sale of securities or shares of a company to the general public. Any company seeking to raise funds to expand or develop its business will turn to an IPO because it is an effective way to generate new capital.

Beyond raising funds, another purpose of an IPO is to build confidence and enhance the company’s image in the eyes of the public. Being listed on the stock exchange serves as a confirmation that the company has undergone thorough scrutiny and is under strict regulation.

Key Players in the IPO Process

Before IPO shares reach the hands of general investors, several parties play important roles in this process:

The Stock Exchange of Thailand (SET) acts as the central marketplace for securities trading and provides various services to ensure smooth operations.

Auditor (Auditor) is responsible for auditing the company’s financial statements according to accounting standards.

Legal Advisor (Lawyer) provides legal guidance and prepares necessary documents.

Underwriter (Underwriter) is a financial institution responsible for distributing shares to investors.

Financial Advisor (Financial Advisor) offers consultation throughout the IPO process and helps determine an appropriate price.

The Securities and Exchange Commission (SEC), the regulatory authority, reviews the company’s qualifications and grants approval for the offering.

Advantages of Going Public via IPO

Investing in IPO shares offers several benefits:

First, Security Confidence: Investors in IPO shares are protected because the company is under the supervision of the SEC and the stock exchange, which guarantees that all information has been verified and meets standards.

Second, High Profit Potential: IPO prices are often set below the actual market value, giving early investors a high chance of profit from price increases. For example, if the IPO price is 10 baht, it might rise to 25-30 baht within a few days.

Third, Ease of Analysis: Investing in IPO shares does not require complex strategies. If you thoroughly study the company’s fundamentals, you can make relatively straightforward decisions.

Disadvantages Investors Should Be Aware Of

However, IPO investments also carry risks and limitations:

Company-Related Risks: The company must disclose all financial information to the public and competitors, which could threaten business privacy. Additionally, significant expenses are involved in system upgrades, hiring consultants, and other costs.

Control-Related Risks: Founders may lose some control as they share ownership with new investors. Moreover, new management appointed by the Board of Directors might pursue different policies.

Investor-Related Risks: If you subscribe during the IPO and the company encounters business problems after listing, share prices may fall rapidly. Also, there is a “Silent Period” where major shareholders (Strategic Shareholders) are prohibited from selling shares for one year, meaning you cannot cash out during that time.

Conditions Companies Must Meet to Conduct an IPO

Not all companies are eligible for an IPO. They must meet strict criteria set by the SEC and the stock exchange:

Company Type: Must be a public limited company or a legal entity established under Thai law.

Financial Standing: Shareholders’ equity must be at least 300 million baht.

Operational History: The company should have at least 3 years of operating history, with management under the same group for more than 1 year.

Performance Criteria: The company must meet one of the following:

• Net Profit Criterion: Total net profit over 2-3 consecutive years exceeds 50 million baht, and the most recent year exceeds 30 million baht.
• Market Capitalization Criterion: Market value exceeds 7,500 million baht.

Governance Structure: The company must have an independent director and an audit committee (Audit Committee) following specified standards.

Financial Documentation: Financial statements must comply with accounting standards and be audited by an authorized auditor.

Preparation Steps for an IPO

The IPO process is not something that can be completed overnight. Several steps are involved:

First, the company should study regulations and consult with financial advisors for guidance.

Second, prepare all necessary documents for approval.

Third, convert from a private company (Private Company) to a public company (Public Company).

Fourth, set the IPO price through a “Book Building” process, which surveys investor demand.

Fifth, establish a provident fund and appoint a securities registrar.

Sixth, submit an application (Filing) to the SEC for approval to offer shares.

Factors Affecting IPO Pricing

The IPO share price is not randomly set but depends on several factors:

Operational History: Companies with a good profit record tend to have higher IPO prices.

Market Conditions: During a bullish market and a healthy economy, IPO prices are set higher.

Demand: During the Book Building process, if demand is high, financial advisors will propose higher prices.

Industry: Companies operating in popular industries tend to have more attractive IPO prices.

Generally, financial advisors set the IPO price below the expected market price to give investors a positive experience and encourage further investment in the future.

How to Subscribe to IPO Shares

Investors can participate in IPOs in two ways:

Method 1: Primary Market (Primary Market)

During this phase, the company offers shares for the first time to raise capital, announced via the SET website or the company’s website. Interested investors can subscribe within the specified period.

Advantages include typically lower IPO prices than the market price. Once the shares are listed and the price rises, investors can realize significant gains—sometimes 100-200% within just a few weeks.

Method 2: Secondary Market (Secondary Market)

After the company is listed, investors who missed the initial opportunity can buy shares through the stock exchange. However, the price may be higher than the IPO price because this involves trading between buyers and sellers. The company does not receive additional funds from these transactions.

Example of IPO Investment

To clarify, consider this example:

Initial Situation: Company A was founded by a founder who invested 3,600,000 baht by purchasing 1,800,000 shares at 2 baht per share (Par Value).

IPO Offering: The company decides to issue an additional 800,000 shares at 15 baht per share, raising 12,000,000 baht.

Post-IPO Results:

• The founder still holds 1,800,000 shares, now valued at 27,000,000 baht (1,800,000 × 15).
• The IPO investors hold 800,000 shares worth 12,000,000 baht.
• The founder owns 69.23%, and IPO investors own 30.77%.
• Total listed shares are 2,800,000.

If the share price later rises to 25 baht, IPO investors will have a profit of 10 baht per share, totaling 8,000,000 baht (25 - 15) × 800,000 shares.

Where to Find IPO Information

If you want to study upcoming IPOs, visit the website of the Stock Exchange of Thailand (SET) at www.set.or.th.

On this site, you will find:

• List of companies under consideration for listing (Upcoming IPO).
• List of companies that have recently offered IPO shares.
• IPO prices and par values (Par Value).
• Offering periods.
• Decision-making documents, such as fundraising objectives and operational plans.

Additionally, you can contact securities firms or financial institutions for further advice.

Impact of IPOs on the Economy

When a company successfully conducts an IPO and raises funds, it impacts the company, investors, and the overall economy:

The company can use the funds to develop business, purchase machinery, and expand production. This creates jobs, increases tax revenue, and adds value to the country.

For example, if a tourism company completes an IPO and raises capital, it might open new hotel branches, create thousands of jobs, and attract more foreign tourists—benefiting the company, local communities, and the national economy.

Conversely, if a company cannot raise funds, it may lead to stagnation, reduced competitiveness, and the loss of talented management, which is a setback for the overall economy.

Summary

From the understanding of IPOs outlined above, it is clear that ipo คือ (what an IPO is) is a vital financial tool for both entrepreneurs seeking capital and investors aiming for returns.

Investing in IPO shares is not difficult or requiring special skills. The key is education, understanding the information, and exercising caution. Those with sufficient knowledge can succeed in their investments.

Therefore, if you are contemplating whether to enter the IPO market, study more from the stock exchange, follow companies of interest, and consult with financial advisors. The more you learn, the greater your chances of success.