How does an investment banker decide how many shares to price in a IPO



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This is Mallikarjun,

Thank you for your answer,

One fundamental question is, before going to an IPO,by using what math and assumptions that company holds 10,00,000(100% equity) shares outstanding?

2 Answer(s)


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That depends on the initial share capital of the company. Typically when a private limited company is established the share capital has to be Rs.1,00,000. This could be 10,000 shares x Rs.10 each or 1,000 shares of Rs.100 each or any such combination. The founders typically can pick whatever such share capital structure they like.

This share capital will keep increasing at every stage the company raises new money. So most likely before the IPO 100% of the company will not be owned by the promoters. There will be other small investors as well who own anywhere from 5% to 60% of the company.

Does that make sense ?

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