An IPO can issue new shares, allow existing shareholders to sell, or combine both. The distinction matters because only fresh-issue proceeds enter the company, while offer-for-sale proceeds go to the selling shareholders.
Follow the money
Read the stated use of fresh proceeds, such as debt repayment, capacity, working capital or general corporate purposes. Test whether the amount and timing fit the company's disclosed strategy.
Understand dilution
New shares increase the number of outstanding shares and change ownership percentages. Review the pre- and post-issue capital structure rather than comparing only the face value or offer price.
- Pre-issue shares
- Fresh shares issued
- Post-issue shares
- Promoter holding after issue
Read the OFS seller details
Identify which promoters, investors or other shareholders are selling and how much they retain. An exit is not automatically negative, but the context and post-issue alignment deserve review.
Evaluate the combined transaction
The issue mix should be considered with business quality, cash needs, valuation and risks. Neither a large fresh issue nor a large OFS produces a standalone investment conclusion.
Test whether proceeds address the stated need
Compare the fresh capital allocation with debt, capital expenditure or working-capital requirements disclosed elsewhere in the document. A broad general-corporate-purpose amount may need closer attention because its final use is less specific.
For the OFS, review seller history and remaining ownership without assigning motive that is not disclosed. The transaction context matters, but it should be combined with business and valuation evidence.
- Purpose and amount
- Implementation timeline
- Funding gap after issue
- Seller holding after OFS