Stock Investment Mode
Following are the modes of investment in stock;
IPO - Initial Public Offer
An initial public offering (IPO) is the process through which a company issues/offers its securities to the public for the first time. The company goes for IPOs for various reasons which include raising money for a specific project; or to list their securities on the stock exchange; or to meet their working capital requirements or to pay extensive debts etc.
The shares are offered to the public through an offering document called “prospectus or “offer for sale document’’ (incase shares are offered by existing shareholder of a company and not by the company itself) which covers all information relevant to the issue and which helps an investor to make his/her decision whether to invest in a particular scrip or not. The information contained in the prospectus includes procedures for application of shares; financial and general information about the issuer; purpose of utilization of the proceeds of the issue; risk factors and advice for investors.
Before issue of shares, the prospectus or the offer for sale document, as the case may be, of a company must be cleared by the respective stock exchange under the listing regulations and must be approved by the Commission under section 57 or section 62 (in case of offer for sale document) of the Companies Ordinance, 1984.
The shares offered to the public may be at par or premium.
The Company may issue its shares to the general public either at fixed price or at a price determined through book building mechanism. Where the shares are offered at a price determined through book building mechanism then the company is required to fulfill the requirements which pertain to the book building offering mechanism as mentioned in the Listing Regulations.
Secondary Market (Stock Exchange)
The market that exists in a new security just after the new issue is often referred to as the secondary Market/aftermarket. Once a newly issued stock is listed in a Stock Exchange, investors and speculators can easily trade on the exchange through members of the stock exchange (stock brokers). Liquidity is the main benefit of the secondary market. Supply and demand in stock markets are driven by various factors which, as in all free markets, affect the price of stocks.
A Stock Exchange provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. To be able to trade a security in a certain Stock Exchange, it has to be listed there. There is a central location for Securities movement and shareholding’s recordkeeping (Central Depositary Company of Pakistan).
Trade on an exchange is allowed for members only (stock brokers) therefore to Trade in the Stock Exchange, you must be an account holder with a member (broker) of an exchange.