THREAD - Detailed explanation & insight into the upcoming BigHit IPO to help you understand how it all actually works [from a global investors point of view] - baby explanation at the end of this thread too!

Basics: IPO is also referred to as the ''primary market'', where investors can buy shares directly from the company through underwriters. ''Secondary market'' is once the IPO is finished and the company enlists in the KOSPI/stock market.

''Underwriters'' or IPO Managers are financial institutions/companies that Big Hit has hired to sell their shares on their behalf.

1) Due to the nature of IPO's, the shares are available for purchase directly from the IPO Manager or underwriters only. For Big Hit IPO these are; NH Investment & Securities, Korea Investment & Securities, and JP Morgan SK. Mirae Daewoo is a joint IPO Manager/underwriter.

2) When buying shares on the IPO as a global investor, you will incur AT LEAST the following fees on top of the price of each share; the underwriters management fees [often between 3% - 7%], your brokers fees, foreign currency transaction fees.

3) After the IPO closes and the company lists in the secondary market [KOSPI] buying shares will become ''easier'' as they will become available as EFT's and individual shares, as well as index and mutual funds options. You won't have to purchase directly from the IPO managers.

4) The BENEFITS of buying in IPO [primary market] vs secondary market [after the company lists]; buying shares from IPO you get first mover advantage, which essentially means you get to buy the shares at smaller price. [cont]

By the time the shares hit the secondary market, other investors [those who did not get in on the IPO], will try to buy the shares, which will cause the price of the shares to fluctuate up and down. [cont]

When this happens, in the best case scenario, those who got in on the initial IPO will have an advantage as they paid the lower price their shares to begin with. [cont]

In some cases, the opposite can also happen where the price of the shares does no go up after the company enters the secondary market - in which case, if you bought the shares in the IPO, you will end up with a loss, and those who did NOT buy in the IPO will end up buying cheaper

Put it simply, it all comes down to basic supply and demand. Judging the current value and the expected future value is the hardest part, although in general, th BH IPO comes with high expectations of increased future value...[cont]

...however, the nature of trading direct individual shares comes with a high financial risk as predictions are only ''the best guess'' and the actual outcome of what will happen to the shares in the secondary market can never be set for certain.

IN BABY TERMS; IPO is when you get to buy the ice cream at a cheaper price directly from the man who made it, before he starts selling it at the local supermarket.

Once the ice cream goes on sale at the local supermarket, the price might be lower or higher than what you paid, depending on how all the other ice creams flavours in the supermarket are selling.

If you paid the ice cream maker $2 for one scoop, but he then sells it at the local supermarket for $1 per scoop, you lost money. If he sells the ice cream at a local supermarket for $3 per scoop, it means you saved/made money.

- end of thread -