What is an IPO
An IPO (initial public offering) is the moment a private company sells its shares to the general public for the first time and lists them on a stock exchange. In Pakistan that exchange is the Pakistan Stock Exchange (PSX).
A company goes public for a few common reasons:
- To raise new capital for expansion, debt repayment or new projects. The company issues new shares, and the money goes to the company.
- To let existing owners sell. Founders or early investors sell part of their holding. This money goes to the sellers, not to the company.
- To gain a listed price. A quoted share price makes the company's value visible and makes its shares easier to trade.
Many IPOs combine new shares and shares sold by existing owners. The prospectus states the split, and it is worth reading closely. When most of the offer is owners selling, the company itself gets little of the money.
If shares are new to you, start with What Stocks Are and PSX basics.
- A company sells new shares to investors in an IPO; the money goes to the company.
- The shares are listed on a stock exchange.
- Investors then trade them with each other (the secondary market); the company receives nothing from these trades.
- The price moves with supply and demand; shareholders may receive dividends.
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Who supervises a PSX IPO
The regulator is the Securities and Exchange Commission of Pakistan (SECP), with trading in listed securities and commodities only via SECP-licensed securities and futures brokers. Before the offer opens, the company publishes a prospectus. This is the official offer document. It covers the business, its financial statements, the use of proceeds, the risk factors, the offer structure and the timetable.
For the specific dates, price range and application rules of any offer, rely on the prospectus and on PSX announcements. Do not rely on social media posts or messages from strangers.
How an IPO is priced
PSX IPOs generally use one of these pricing methods.
| Method | How the price is set | What a retail buyer sees |
|---|---|---|
| Fixed price | The company and its advisers set the price in advance | You apply at the stated price |
| Book building | Institutional and other eligible bidders bid within a price range, and the final "strike price" comes out of the demand | Retail applicants usually apply later at the strike price found in book building |
Book building works like this. Bids are collected over a set period. The adviser ranks them by price and finds the level at which the offered shares are covered. That level becomes the strike price.
Strong demand from large bidders can push the strike price towards the top of the range. A high IPO price does not mean the company is worth that much. It only shows what bidders were willing to pay during the bidding period.
To judge whether the price is reasonable, compare it with listed peers using the ratios explained in Valuation Ratios. Then check the prospectus figures with the help of Financial Statements.
How to apply for an IPO in Pakistan
The usual path for a retail applicant looks like this:
- Open a brokerage account and a CDC account. Shares on the PSX are held electronically in the Central Depository. A licensed broker can open both accounts for you. Per the SECP, lists of licensed brokers are on the PSX and PMEX websites.
- Read the prospectus. Check the offer size, the retail portion, the price or price range, the minimum application size and the dates.
- Submit the application during the subscription period, through your broker or another channel named in the prospectus. Then pay the application money.
- Wait for allotment. If retail demand is larger than the shares on offer, shares are allotted by the method stated in the prospectus, which may be a ballot or a pro-rata split. You may get fewer shares than you applied for, or none.
- Receive refunds and shares. Money for unallotted shares is refunded. The allotted shares are credited to your CDC account.
- Listing day. The shares begin trading on the PSX. From then on, the market sets the price.
The exact steps, cut-off times and refund timelines vary from offer to offer. Check them in the prospectus and with your broker.
Lock-ups
A lock-up is a period after listing during which certain holders, usually sponsors and major pre-IPO shareholders, may not sell their shares. Lock-ups exist so that insiders cannot sell out right after the public has bought in.
What it means for you:
- The prospectus states who is locked up and for how long.
- When a lock-up ends, a large block of shares may become available for sale. If insiders sell, the price can come under pressure. It is worth noting the expiry date in advance.
- A lock-up limits when insiders can sell. It does not guarantee anything about the company.
Risks for retail buyers
- Limited track record. A new listing has little public trading history. The prospectus is often the main source of information, and the company wrote it.
- Price after listing. The share can open below the IPO price and stay there. Early gains on some IPOs say nothing about the next one.
- Allotment uncertainty. Your application money is tied up until allotment and refunds are complete, and you may receive only a small allotment.
- Low liquidity. Some newly listed shares trade thinly. This means a wide gap between buy and sell prices and difficulty exiting.
- Concentration. Putting a large share of savings into a single new issue raises your risk. See Diversification and Risk Tolerance.
- Scams. Fake "pre-IPO" offers and unofficial agents promise guaranteed allotment or quick returns. SECP warnings by press release naming platforms (Quotex 09.04.2025; IBKR look-alikes, IGIL Securities, BMA Capital No.108 etc. 22.05.2025; Hillhouse Capital, S-169 Wharton 13.01.2026), none of which names Exness. Only apply through licensed channels. See Law and regulators.
Buying shares through an IPO is investing in a company. It is not the same as trading leveraged CFDs on share prices. Leveraged CFD trading can lose money fast, and on offshore platforms, per the SECP, offshore forex/CFD platforms operate without regulatory approval in Pakistan.
After the IPO
Once listed, the company behaves like any other listed share. It may pay dividends and may later carry out splits or rights issues. Its price moves with results and market conditions.
Frequent questions
What is an IPO in simple words?
It is a company's first sale of shares to the public, followed by listing on a stock exchange such as the PSX.
How do I apply for a PSX IPO?
Open an account with a licensed broker and a CDC account. Read the prospectus, then apply and pay during the subscription period through a channel the prospectus names.
Will I get all the shares I apply for?
Not necessarily. If the offer is oversubscribed, shares are allotted by the method stated in the prospectus, and the rest of your money is refunded.
Do IPO shares always rise on listing day?
No. They can list below the offer price. Nobody can promise a listing-day gain.
What happens when a lock-up ends?
Locked-up holders become free to sell. If they sell heavily, the share price can fall.
Where can I check if a broker is licensed?
Per the SECP, lists of licensed brokers are on the PSX and PMEX websites.