Every company strives to attract investment for development and growth. At the initial stage, startups traditionally have difficulty obtaining a bank loan or finding a potential investor willing to invest in the development of the startup. Financial technology expert Sergey Kondratenko says that in such cases, the company can issue shares and use them as an investment tool.
This process requires serious financial investments from investors. But a successful public offering allows a company to raise hundreds of thousands, millions and, in some cases, even billions of dollars. How does an initial public offering (IPO) happen and what has changed with the introduction of new technologies in this area?
Sergey Kondratenko is a recognized specialist in a wide range of e-commerce services with experience for many years. Now, Sergey is the owner and leader of a group of companies engaged not only in different segments of e-commerce, but also successfully operating in different jurisdictions, represented on all continents of the world. The main goal is to drive new traffic, create and deliver an online experience that will endear users to the brand, and turn visitors into customers while maximizing overall profitability of the online business.
Business in search of capital: Why is an IPO a key moment for the successful development of a company? – Sergey Kondratenko
In the case of a successful business, the need for additional capital to continue development is inevitable. In this case, companies can apply for a loan, issue bonds or bills. But the most profitable option, according to Sergey Kondratenko, is to issue shares for trading on the stock exchange. This approach potentially opens up access to millions of investors and billions of dollars in investment.
Initial Public Offering (IPO) is the process by which a company offers its shares for sale on the open market for the first time. In this way, capital is raised from a wide range of investors, including individuals and institutional investors. What is the IPO market and how to participate in it?
Sergey Kondratenko: The path to participation in the IPO
If you have a brokerage account with a financial reserve, then you may well participate in the IPO. Sergey Kondratenko notes that the minimum amount for participation may vary depending on the specific IPO. It can be expressed both in national currency and in foreign currency.
According to the expert's observations, participation in the IPO of a large international company can be a significant investment that goes beyond the capabilities of many investors. Sergey Kondratenko notes that some IPOs may be limited to qualified investors who meet certain requirements and standards.
First of all, the total volume of assets should be calculated at tens (or even hundreds) of thousands of dollars. Additionally, turnover on transactions in financial markets over the past year must not be lower than the specified amount. This turnover is defined as the total amount of all transactions in financial instruments and securities, including profitable and unprofitable ones. It is also important to participate in regular transactions - at least one monthly and at least ten for each quarter.
Additional requirements for qualified investors include several criteria, which Sergey Kondratenko calls:
➔ A higher education in economics emphasizes the theoretical background of an investor, which can be an important factor when making decisions in the field of financial investments.
- International certificates CFA, CIIA, and FRM: their presence indicates specialized knowledge and professional competence in the field of finance and investment.
- Experience. If the company has the status of a qualified investor, then at least two years of experience is required, otherwise - at least three years.
- Specialization in securities. The criterion also assumes that the investor's work experience must be in the field of securities.
If you want to become a retail investor, then more loyal requirements are put forward to you:
● Select a company.
- Review the IPO prospectus
- Find out the rules of participation.
- Open a brokerage account.
- Top up your account.
- Submit an application.
- Take into account possible oversubscription: in the event of oversubscription, the broker may reject the application or not fully fulfill it. However, you will need to request additional funds and a new application if you want to meet the deadline.
- Receive notification: After completing the application, you will receive notification of the results.
Sergey Kondratenko reports that these steps will help you actively participate in the IPO of the selected company and monitor the process through the brokerage platform.
Sergey Kondratenko: digital transformation in stock trading
Investors, banks, and equity firms, before the advent of technology, had to process large volumes of applications manually. Innovative changes in the stock trading process demonstrate the significant benefits that digital technologies and electronic systems have brought to this area. Sergey Kondratenko names the key advantages of new approaches to stock trading:
- Troubleshooting physical problems: The transition from physical to digital shares reduces the potential for disputes such as mismatched signatures or loss and damage to paper shares.
- Efficiency and perfect performance: Thanks to new technologies, it has become possible to ensure efficiency and smooth operation from the moment of application to the crediting of shares to Demat accounts or the release of funds.
- Ease of application: banking apps make the application process easy and convenient, which significantly improves the investor experience.
- Information transparency: investors now receive information about every step of the process via SMS or email, increasing transparency and reducing stress in the process.
- No loss of interest: There is no loss of interest since money is withdrawn only if the shares are distributed successfully.
- Minimum effort on the part of the investor: investors require minimal effort to apply and the process takes just a few minutes.
Sergey Kondratenko emphasizes that these changes demonstrate how digital technologies are improving the accessibility and efficiency of the stock trading process. They make it more convenient and transparent for investors.
IPO market statistics: Stocks fall in 2023 and expectations for 2024 - Sergey Kondratenko
Hong Kong Exchanges & Clearing shares suffered significant losses in 2023, falling 24% to $32.1 in New York. These indicators became the most negative, according to analysis from Bloomberg.
Based on the information provided by Sergey Kondratenko, we can highlight some interesting dynamics in various world exchanges:
➔ Argentina Stock Exchange: quotes have increased 3.4 times and reached 780 Argentine pesos since the beginning of the year.
- Moscow Exchange: shares doubled in price, reaching 197.9 rubles. year to date.
- Commodity Exchange of India: Shares doubled to INR 3,370.
- US Exchanges: While shares of the Chicago options exchange CBOE Global Markets rose 41.7%, shares of the technology stock exchange NASDAQ fell 9.3%. This indicates multidirectional trends in American financial markets.
- Obvious reasons for the sharp decline in shares of Hong Kong Exchanges - the world's fourth-largest exchange by capitalization with a volume of $41 billion - include the economic slowdown in China, geopolitical tensions, and global rising interest rates. Trading volumes have declined and new listings have become rare. I would agree with Bloomberg Intelligence's findings that 2023 was the fourth year of losses for the Hang Seng Index. Since the beginning of the year, it has fallen by 17.4% - to 16,345.89 points, emphasizes Sergey Kondratenko.
As the expert says, stock exchanges do not always accurately indicate the overall market picture; they are closely related to turnover, interest rates, and institutional restrictions. However, he suggests that a possible resumption of IPO activity in 2024 could increase interest in NASDAQ shares.
