What's the difference between - IPO price vs Listing Price?

[saurabhmodh94]

I am currently understanding at very begginer level- how IPO allotment process works.
While taking an example of PAYTM, I could not understand difference between IPO price vs Listing Price?
For paytm case,

• IPO price: ₹2150/per share (range-2080 to 2150)
• Listing price:
  • On NSE, listed at ₹1,950 per share, at 9% discount as compared to its IPO issue price
  • On BSE, Paytm shares started trading at ₹1,955 per share.
• The stock closed over 27% lower at ₹1,564 per share from its issue price on its first day.

So the question is, how did price change from 2150 to 1950 on a day of listing? And what is this 9% discount?

 

[luciferocious]

The IPO price and the listing price are two different aspects of the process of taking a company public.

1. **IPO Price**: This is the price at which the company offers its shares to investors during the Initial Public Offering (IPO). In the case of Paytm, the IPO price was ₹2150 per share, with a price range set between ₹2080 to ₹2150. This is the price at which investors who participate in the IPO purchase shares directly from the company before they are available for trading on the stock exchange.

2. **Listing Price**: The listing price is the price at which the shares begin trading on the stock exchange for the general public. It is determined by market forces such as supply and demand dynamics. The listing price can be different from the IPO price due to various factors such as investor sentiment, market conditions, and demand for the company's shares.

In the case of Paytm, the listing price was lower than the IPO price. This indicates that the market determined the value of Paytm shares to be lower than what was initially offered during the IPO. The difference between the IPO price and the listing price is influenced by various factors, including investor perception of the company's value, market conditions, and overall demand for the stock.

The 9% discount you mentioned refers to the fact that the listing price on NSE was ₹1,950 per share, which was 9% lower than the IPO price of ₹2,150 per share. This discount was likely a strategic move to attract investors and ensure a successful listing despite the challenging market conditions.

On the day of listing, the price can change due to various factors such as investor sentiment, trading activity, and overall market conditions. In the case of Paytm, the stock closed over 27% lower at ₹1,564 per share from its issue price on its first day, indicating significant selling pressure and possibly lower-than-expected demand for the stock at the IPO price.

 

[saurabhmodh94]

On the day of listing, the price can change due to various factors such as investor sentiment, trading activity, and overall market conditions. In the case of Paytm, the stock closed over 27% lower at ₹1,564 per share from its issue price on its first day, indicating significant selling pressure and possibly lower-than-expected demand for the stock at the IPO price.

@luciferocious It would be great if you can put more light onto this.

Ideally, my understanding forcing me to believe that, on the day of listing at 9 AM, share price should start from the IPO listing price (unless any explicit discount or something) and then eventuly price should change based on market sentiments and trades.
But, in most cases, the listing price is always far too off from the IPO price.

So, question is, what happens to share price between IPO and listing day 9 AM? Since share is not even listed, there is no trade possibility as well.

 

[luciferocious]

@luciferocious It would be great if you can put more light onto this.

Ideally, my understanding forcing me to believe that, on the day of listing at 9 AM, share price should start from the IPO listing price (unless any explicit discount or something) and then eventuly price should change based on market sentiments and trades.
But, in most cases, the listing price is always far too off from the IPO price.

So, question is, what happens to share price between IPO and listing day 9 AM? Since share is not even listed, there is no trade possibility as well.

I dont think it works in that way. IPO opening price also depends on the market forces/sentiments/trades