IPO Stocks You Need to Know - A Guide to Booking and Understanding Initial Fundraising

Most people who enter the investment world often miss out on important opportunities like IPOs because they lack understanding of how the mechanism works. However, IPO financing is not as complicated as you might think. In fact, if you understand the process correctly, some IPO stocks can generate returns of up to 200%. Keeping an eye on these opportunities is therefore something that should be taken seriously.

How to Reserve IPO Shares - Two Paths for Investors

For those who want to reserve initial shares with a company, there are two options:

Method One: Reserving Before Market Entry (Primary Market)

During this period, companies will announce through the SET website or their own websites to interested parties to reserve and purchase. The clear advantage is that the set price is usually lower than the actual market price once trading begins. Speculating during this initial phase is a good opportunity for those who follow news closely.

Method Two: Buying After Registration (Secondary Market)

If you miss the first chance, you can still buy IPOs on the stock exchange just like regular stocks. However, the price may be significantly higher than the initial offering, and volatility will also be more apparent.

What is an IPO Really?

To simplify, IPO (Initial Public Offering) is when a company that is already established decides to sell shares to the public for the first time. The main purpose is to raise funds to develop the business, enabling the company to grow. An additional hidden purpose is to build reputation and brand acceptance. In reality, going public with an IPO is not easy, as it must undergo strict scrutiny by the SEC and the stock exchange, which set many rules and conditions.

Why Do Companies Want to Go Public?

A company with an IPO is signaling to the world, “We are ready, and we have the potential to grow further.” Raising capital through the public market is a sign of business credibility. Additionally, the company owners can distribute risk among many investors instead of keeping everything for themselves.

Benefits for IPO Investors

First, confidence is gained because being regulated by the SEC and the stock exchange provides peace of mind. Companies must disclose financial data and other details to the public. Moreover, profits and dividends are fairly distributed among investors.

When the economy is strong or market conditions are favorable, IPO stocks have a high potential for quick profits. Long-term investors can also use IPOs as a solid investment base, as this type of stock analysis doesn’t require advanced techniques—just study the company’s profile thoroughly.

Drawbacks Companies Must Bear

When choosing an IPO, companies must disclose all financial information to the public. Profit and loss statements, tax data, and other details are made available, which competitors can use. Business secrets are no longer private.

The costs of an IPO are also substantial, including internal control system improvements, preparing financial statements according to standards, consulting fees, and investment banking fees—all amounting to millions of baht.

Initially, company founders hold 100% of their shares. After the IPO, their ownership percentage decreases because thousands of investors now own parts of the company. Furthermore, the publicly appointed management board can remove founders from leadership positions.

Conditions and Qualifications for IPO Companies

Before a company can register for an IPO, it must meet several requirements. The SEC stipulates that the company must be a public limited company established under Thai law.

Financial Requirements: The company must have a minimum paid-up capital of 300 million baht, and net profits for two or three consecutive years must total more than 50 million baht. The last year’s profit must be at least 30 million baht. Another standard is that the company’s market capitalization must exceed 7,500 million baht.

Operational History: The company must have been operating for more than 3 years, with the same board and management team continuously managing the business for over 1 year.

Management Structure: The company must establish a public board of directors, have independent directors as required, and a audit committee. It must also commit to becoming a member of a provident fund and appoint a registrar from TSD or an approved entity.

IPO Preparation Process

The IPO process requires time and preparation from multiple parties, starting with studying regulations and consulting financial advisors.

Next, the company must prepare documents to request approval from the SEC and convert from a limited company to a public limited company, which also requires signing off from the Ministry of Commerce.

Subsequent steps include setting the price, marketing, establishing a provident fund, appointing a registrar, preparing shareholder registers, depositing shares into a dematerialized system, and finally filing with the SEC.

Who Are Involved in the IPO Process?

The Stock Exchange of Thailand (SET) acts as the central body overseeing securities trading. The Ministry of Commerce handles company conversion. Certified auditors review financial statements. Internal control auditors assess system efficiency.

Legal advisors provide legal guidance and handle documentation. Asset appraisers evaluate company assets. The Securities Depository Center (TSD) maintains shareholder registers. Underwriters help distribute shares. Financial advisors guide the entire process. The SEC reviews and approves the offering.

How to Price an IPO

Setting the IPO price is crucial because it affects how many investors will buy and is determined by financial experts or investment banks.

Generally, IPO prices are set relatively low to attract investors. Then, a book-building process or demand survey is conducted to determine the most appropriate price. The final price is closely related to current market conditions.

Where to Find IPO Information

To follow new IPO offerings, visit the SET website. It lists companies under consideration or newly registered firms. Interested investors can check the par value and IPO price, then plan their investments accordingly.

The website also provides documents such as the purpose of fundraising, offering period, trading volume, and detailed business information for those who want to study thoroughly before investing.

Impact of IPOs on the Economy and Capital Markets

The primary purpose of IPOs is for companies to raise funds to develop their business, which impacts the national economy positively and negatively.

For example, if Thailand’s key tourism industry receives support through IPO funding, it can expand, create jobs, generate income, and investors can earn attractive returns. Conversely, if a company cannot go public, it may struggle to accumulate funds for development, falling behind competitors.

Example of Shareholding in an IPO

If the founder initially invests 3.6 million baht and owns 100%, holding 1.8 million shares at 2 baht per share.

When the company decides to go public by issuing 800,000 new shares at 15 baht per share, it raises 12 million baht.

After the IPO, the founder still holds 1.8 million shares, but their value increases to 27 million baht (1.8 million x 15 baht). The IPO investors hold 800,000 shares, representing 30.77% of the company, while the founder retains 69.23%.

Both parties can now buy and sell shares on the stock exchange. The company owner seeking opportunities can grow their wealth and increase returns.

Summary - What Does an IPO Stock Mean for You?

If you are new to investing or looking for new ways to generate returns, IPO stocks are an opportunity not to overlook. The key is to study thoroughly—understand the potential of the IPO company, how much profit it can generate, and what risks are involved.

There is no such thing as “being good” or “not good” in investing; it depends on whether you make a profit or incur a loss. The more you learn, the higher your chances of success. IPO stocks are a playing field for everyone willing to learn.