What should you know before buying IPO stocks? Start with understanding the basics.

In the world of investing, the emergence of IPO stocks often brings both hope and risk. Many investors see price charts soaring over 200% and decide to join in, but still have questions about what IPO stands for and why it is important for investment work.

What does IPO stand for? And what does it mean?

IPO or Initial Public Offering is the process where a company decides to sell its shares to the public for the first time to raise funds from the public to develop and grow the business. Besides increasing capital, it also provides an opportunity for ordinary people to become part owners of the company.

From the company’s perspective, going public through an IPO helps build brand confidence and enhances the long-term business image when the company is accepted and listed on the stock exchange.

Why is investing in IPO stocks interesting?

Advantages investors should know:

• Conducted under the supervision of the SEC and the stock exchange, ensuring a high level of safety
• Receive fair benefits from the company with clear financial information
• During favorable economic conditions, IPO stocks have high profit potential within a short period
• Suitable for long-term investors without complex strategies, just study the company’s profile

Limitations to be cautious of:

• The company must disclose all financial data, which competitors might use to their advantage
• Need to establish strict internal controls and seek various advisors, which can be costly
• Company owners may lose control when there are many shareholders
• Decision-making authority shifts to the management committee, not the original owners

What qualifications must a company meet to IPO?

The SEC and the stock exchange have strict requirements for companies applying for approval:

Structural and status requirements:

• Be a public limited company or a legal entity established under Thai law
• Have a minimum shareholder equity of 300 million baht before applying for IPO approval
• Shareholder equity must not be less than 0 before IPO

Operational performance (Choose one criterion):

• Net profit criterion: consecutive 2-3 years with total profit over 50 million baht; the latest year must be over 30 million baht
• Market value criterion: Market Capitalization exceeding 7,500 million baht

Management requirements:

• Operated continuously for more than 3 years under the same board of directors for over 1 year
• Clear share distribution structure according to SEC regulations
• Established a legal provident fund
• Have independent directors and audit committees according to standards

Financial requirements:

• Financial statements must comply with international accounting standards
• Auditors must be approved by the SEC
• No conflicts of interest

Parties involved in the IPO process

Bringing shares to the market requires cooperation from various sectors:

• The Stock Exchange of Thailand (SET): Oversees trading and related services
• Ministry of Commerce: Converts limited companies into public companies
• Auditors: Verify financial statements according to standards
• Internal control auditors: Assess risk management systems
• Legal advisors: Prepare documents and handle legal procedures
• Valuers (Valuer): Appraise related asset values
• Securities Depository Center (TSD): Register shareholders
• Underwriters (Underwriter): Assist in selling and distributing IPO shares
• Financial advisors (FA): Provide guidance throughout the process
• The SEC: Review qualifications and approve the offering

What are the steps to prepare for an IPO?

Once a company decides to enter the market, it must go through these steps:

1. Study regulations and consult financial advisors for guidance
2. Prepare complete documents for approval
3. Convert from a limited company to a public company
4. Set the IPO share price and handle publicity
5. Establish a provident fund and appoint a securities registrar
6. Prepare shareholder register and deposit shares in book-entry form
7. Submit application for approval to the SEC

Where does the IPO price come from?

One of the most important aspects is setting the IPO share price, which greatly affects investor interest. The price is often set below the intrinsic value to generate interest in buying.

Investment banks and financial advisors conduct Book Building to gauge demand, then determine a price that balances between a low price to attract investors and a high enough price to support effective fundraising.

Let’s look at a concrete example of IPO registration

Suppose XYZ Company starts with founders holding 100% of shares as follows:

• 1,800,000 shares at a par value of 2 baht/share
• Total capital: 3,600,000 baht

When the company decides to IPO by issuing an additional 800,000 shares:

• IPO price: 15 baht/share
• Funds raised: 12,000,000 baht (800,000 x 15)
• Founders’ share value: 27,000,000 baht (15 x 1,800,000)

After the sale:

• Founders hold 69.23% (1,800,000 ÷ 2,600,000 shares)
• IPO investors hold 30.77% (800,000 ÷ 2,600,000 shares)
• Total shares: 2,600,000

After registration, both parties can freely trade shares in the secondary market.

Where to see IPO stocks and how to follow information

For those interested in tracking new IPO projects, visit the SET website:

• Announcements of companies under consideration (Upcoming IPO)
• New IPO launches (New IPO Launch)
• Price and par value information (P/V Price)
• Download detailed documents of each company
• Conditions and offering periods

This information helps you plan your budget and make better investment decisions.

The impact of IPO on the economy

Raising funds through IPO not only benefits the company but also creates positive effects on the country’s economy:

• When companies receive funds, they develop their business, e.g., the tourism sector which grows significantly
• Creates jobs and supporting industries
• Investors profit from holding shares
• Conversely, companies lacking funds may face limitations in expansion

How many ways are there to subscribe to IPO shares?

Channel 1: Subscribe in the primary market (Before listing

This is an opportunity for the general public to subscribe to shares before they are officially listed on the market:

• Companies announce via SET website or their own website
• Brokers open for subscription
• Subscription price usually lower than the market price
• Investors have the chance to profit from buying at a lower price

) Channel 2: Buy in the secondary market ###After listing

Once the company is listed:

• Initial investors (IPO Investors) may sell their shares in this market
• Those who missed the opportunity can buy here
• Prices may be much higher due to volatility
• Only transfers between external investors; the company does not receive additional funds

Cautions for IPO investors

Before deciding to invest, consider this:

• Study the company’s profile thoroughly: read carefully, not just look at the numbers
• Avoid playing risky games: IPO investing requires knowledge and understanding
• Reduce risk: do not invest all your money in a single IPO stock
• Follow information: during the waiting period, new data may emerge

Summary

Those who understand that IPO stands for Initial Public Offering and study how it works will find it to be a high-potential investment method. Whether you are a general or professional investor, the more you learn, the greater your chances of success. So, don’t rush; remember that IPO is just a tool, but good investment decisions depend on your knowledge and discipline.