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

The decision to sell shares is up to you. But as a general recommendation, it is better to keep your stock as long as there is a buy queue in the stock.
Recently, a new method called "Book Building" was unveiled on the Tehran Stock Exchange to buy the initial public offering.

How to sell initial public offering

You can sell your stock the day after the initial public offering, but as a general recommendation, it is best to keep your stock as long as there is a buy queue in the stock.

If the stock is offered at a reasonable price, the price usually rises within a few days and therefore there is no desire to sell the stock at first. But for investors who do not know the value of the share, it is better to sell their share if there is a buy queue.

Price growth after the initial public offering

Share price growth after the initial public offering depends on the following factors:

• Number of shares offered: The fewer the number of offers, the fewer sellers there will usually be .
• Major Shareholder Behavior: If the major shareholder does not offer another stock after the initial public offering, the stock will usually grow more .
• Overall market atmosphere: When the overall market atmosphere is positive and everyone is optimistic, few people are willing to sell .
• News and rumors about the stock: Sometimes negative or positive news and rumors are formed about the offered shares and people make decisions based on these rumors and news .
• Intrinsic value price gap: The cheaper the stock is offered in the initial public offering, ie the greater the distance from its intrinsic value, the more buyers are encouraged to buy .

An example of a return on initial supply

Given the explanations provided, here are some examples of the initial supply performance of the last few years :

In 1996, Mobin One Kish Company had 268% return in 25 days, Mellat Pay Company in 26 days, 26% return, Web companies in 22 days, 62% return and Shafadaro Company in 5 days -5% return had! As can be seen in this example, initial public offerings are not always accompanied by positive returns. In 1997, Atrin Nakh Qom Company granted 97% return in 20 days, Isfahan Kesht Agricultural and Mechanized Company granted 100% return in 24 days, Pars Agro-Livestock Company granted 170% return to shareholders in 35 days. In 1998, Rahavard Tamin Pharmaceutical Company 205% return in 40 days, Polypropylene Jam Company 37% return in 7 days, Sadr Tamin Investment in 5 days 20% return and Jahrom Power Plant Development Company in 40 days 40% return to shareholders Awarded. It should be noted that these are just a few examples of early releases in recent years.

How to buy first offer stock without liquidity?

Some brokerages buy the initial public offering on behalf of the investor with the aim of attracting the customer, without having a rial balance. In effect, they are crediting the investor. Usually, if the investor settles the account with the brokerage after a few working days, he will become the owner of the shares. Otherwise, the brokerage sells the stock to settle the investor's debt.

Check out a sample ad for the first time

Below you can see the ad for the first release of the "Tasiko" symbol. The announcement includes the following:

• Release date
• Number of shares and equivalent percentage of the total shares of the company
• Division, group and class of shares
• A symbol
• Price floor and ceiling
• Manager and committed supply
• Maximum real and legal purchase ceiling

For information on the first offer of companies, you should follow the news of stock exchange sites and news channels. Most brokerages also inform their clients about these offers. Once you know the release date of the first release, open the "tsetmc" site around 10 am on the same day and follow the market watch notifications.

✔ order book building method What?

Recently, a new method called "Book Building" was unveiled on the Tehran Stock Exchange to buy the initial public offering. The most important advantage of this method is the possibility of registering an order at different prices. In the book building method, each order is specified according to the maximum volume and will be registered in the trading system at the price determined by the buyer. In this way, there is no injustice in the allocation of shares.

In this method, according to their analysis, each buyer registers the request to buy stocks in the trading system at a specific time that is already announced by the market observer. One of the disadvantages of the book building method is the price and the positive and negative limit of 10%. Although the supplier sets a price as the share price floor. But investors can place their buy order in the range between this floor price and 10% above it.

The problem is that this is likely to cause people to place orders and buy stocks at the price ceiling, which may create a buy queue in the initial public offering. But in general, you will buy more easily in this method than in the auction method. Also, it is no longer a priority to order earlier and you should not place your order too quickly. Rather, based on your analysis, you select the price in the specified range and register your order at that price.

✔ Purchase the initial public offering by bookbuilding method

The initial public offering in the bookbuilding method is as follows :

A company that has the conditions of admission in the stock market or over-the-counter market and is so-called "symbolized" in the market is valued by one of the investment or financing consulting companies. This value determination is done after a thorough review of the company, estimating future profitability, estimating the rate of return expected by the investor and using valuation methods such as cash flow discounting.

Due to the nature of the book building method, a price is approved as the minimum price and the price ceiling, which is usually 10% higher than the minimum price, is set so that all investors interested in participating in the first offer, according to their analysis, submit their price request. کردن. But what happens next? We will tell you.

At least 48 working hours before the first offer, the announcement will be published on the website of the Exchange or OTC Organization. In that announcement, the maximum number of shares that can be ordered, the date of the first offer and the allowable price range are determined. On the day specified for the offer, the announcement of the beginning of the initial public offering period will be announced on the website of the Exchange Organization and by the market observer. After that, you have 2 hours to submit your application. At the end of the investor order period, the stock exchange organization will start allocating shares to all applicants in proportion to the number of applicants and the ceiling of the number of shares that can be offered.

Suppose the total number of shares to be offered is 50 million shares and the number of investors who have registered their application is 50,000. On the other hand, each investor has been allowed to request the purchase of up to 2,000 shares. Although all investors have requested 2,000 shares, each investor will be allocated 1,000 shares. Since the beginning of the initial build-up by book building method until now, most of the initial offerings have been done in the price ceiling. Therefore, buyers are advised to submit their purchase request on the price ceiling so that shares can be allocated to them.

To buy initial public offerings, it is important to pay attention to the supervisor's announcement on the day of the launch. Because this announcement includes important items such as the price range of the allowable quota for each person and the time allowed to send the order. On the days when companies make their first offering, there is a lot of traffic to the brokers' site. Therefore, we suggest that you top up your account in advance so that you do not face any problems on the day of release.

In the book building method, each stock exchange code (each person) can participate in the first offer only through a brokerage and through a request. This means that you can not register 250 shares in one order and 150 shares in the second order. Instead, you have to order 400 shares in one order. In the previous method, people registered their order through several brokerages until one of the brokerages finally registered their order. But in the bookbuilding method, due to the two-hour time to send the order, this problem has been solved.

The increase in the share price on the day after the first offering depends on the support of the shareholder by the major shareholder and the existence of appropriate demand from the investors. This has been done with a few exceptions, resulting in a minimum return of 15%.

Know more

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

• Stock sales and initial public offering profitability

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