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Definition of IPO

An IPO or Initial Public Offering is the method in which a privately held company becomes a publicly listed company. Existing shareholders must approve the IPO plan before the company can go public. Once shareholders approve, the company will either hire an intermediary or go for a Direct Public Offering, the result of which will be the determination of a price for the new equity shares that will be listed in the primary market.

Related Terms

Convertible Bonds

A convertible bond is a hybrid security that’s initially designed to be a debt instrument that pays a fixed interest rate in exchange for a loan. Once the loan’s tenure ends, the holder can decide to take one of either action:

  • Don’t convert bond: face value of the bond is transferred to the holder on maturity
  • Forex Trading

    Forex trading means buying and selling currency pairs through exchange-traded derivatives or on the OTC market. A currency can only be bought and sold in exchange for another currency, which is why forex trading is always done in pairs.

    Trading forex derivatives is carried out on stock exchanges authorized by regulatory bodies (SEBI & RBI), in tandem with approved brokers who allow users to engage with the forex futures trading and options trading markets.

    Cash Conversion Cycle

    A Cash Conversion Cycle (CCC) tells you how many days it will take to convert a company’s inventory or resources into cash. The formula for Cash Conversion Cycle is:

    Cash Conversion Cycle = (DIO + DSO) – DPO

    • DIO: Days Inventory Outstanding is the average number of days it takes for a company to turn inventory into cash through sales
    • DSO: Days Sales Outstanding is the average number of days it takes for a company to collect its receivables
    • DPO: Days Payable Outstanding is the average number of days it takes fo a company to fulfil its obligations or payables

    Free Cash Flow

    Free float market capitalization is the market cap of a company based on the total freely available publicly traded outstanding shares. The formula to calculate free float market capitalization is:

    Free float market capitalization = Share Price x (Number of Shares Available for Trading – Private and Locked-In Shares)

    When calculating the free float market cap of a company, the number of shares held privately or the shares that are locked-in are not taken into account. Typically, these shares are held by promoters and the government.

    Convertible Arbitrage

    A convertible arbitrage is a trading strategy that involves buying convertible securities - most commonly bonds and preferred stock - and a short option on the common stock of the same company.

    Because of this combination of purchases, a convertible arbitrage strategy is known as a neutral strategy designed to profit from the supposed inefficiencies that lie in the pricing of convertible securities.

    Advance/Decline Line

    An Advance/Decline Line can help you plot the daily difference between the number of advancing and declining stocks.

    As a result, the Advance/Decline Line is a technical indicator used to gauge market sentiment, price trends, and trend reversals.

    Here’s how the Advance/Decline Line is calculated:


    • Calculate the number of stocks that finished in the red.
    • Calculate the number of stocks that finished in the green.
    • Subtract #1 from #2 to find out the net movement aka Net Advance.
    • Repeat #1, #2, and #3 the next day and add the values for Net Advance.
    • Add both the previous day’s and the present day’s Net Advance. Repeat for future calculations.



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    Attention investors:

    1. Stock brokers can accept securities as margins from clients only by way of pledge in the depository system w.e.f September 01, 2020.
    2. Update your e-mail and phone number with your stock broker / depository participant and receive OTP directly from depository on your e-mail and/or mobile number to create pledge.
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    Note: As a policy we do not give stock tips or recommendations and have not authorized anyone to give this on behalf of us. If you know anyone claiming to be a part of Dhan / Moneylicious / Raise or our associate companies or partners and offering such services, please report us on help@dhan.co. Important Information for Investors: To prevent unauthorized transactions in your trading / demat account, do not share your account details, credentials or any personal details with anyone. Keep your mobile number updated with your Stock Broker, Depository Participant and ensure that the same is registered with Stock Exchanges, Depository and KRAs. You will receive alerts and information on your registered mobile number / email for debit and other important transactions in your demat account directly from CDSL / Exchange on the same day. KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (Stock Broker, DP, Mutual Fund, etc.), you need not undergo the same process again when you approach another intermediary. No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account. This is issued in the interest of investors.


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