Difference Between IPO and OPS

An IPO is a Public Offer for Sale and an OPS is a Public Offer for Subscription. The difference is that in the IPO, existing shares are sold and in the OPS, shares issued in a capital increase are sold that are going to be paid up through the OPS.

To carry out these operations, the company will have to request authorization from the body that regulates these operations. When the operation is approved, the public information prospectus will be presented on which investors base themselves to buy or not the shares that are made available to them.

Requirements in an IPO and OPS

There are several requirements to be able to carry out an IPO or OPS:

  • The company's turnover has to be above a certain level.
  • The company must be audited by an independent entity and it must be demonstrated that there are no conflicts of interest between the company and the companies that audit the accounts.
  • The company does not reflect large and constant losses in recent years. In this aspect, it is very important to take into account the coefficient of own resources.

When making requests for subscriptions or redemptions, the investor does not care whether it is an IPO, OPS or a combination of both. However, if we want to analyze the prospects for future revaluation of the company, it is important to take into account whether it is an IPO or OPS.

The main difference is that in the OPS the company is asking for new money to carry out some type of expansion. Its purpose is to increase its own funds , and its solvency ratio. This normally means that the company is going to undergo a very important change with its IPO, since it is going to become a different company from the one it was before going public.

Valuation of a company

We must take into account two very important things when evaluating the company:

  • It is essential to analyze new investment activities and expansion models.
  • Fundamental criteria, such as earnings structure or balance sheet, must be analyzed and combined with the expectations of new businesses. There are many cases of manipulation of accounts and valuation of companies above their economic reality.

In general, it is positive that the IPO of a company is carried out through an IPO. It usually indicates that the owners not only trust the future of the company, since they do not sell their shares, but also see opportunities for growth and business.

Therefore, the study of IPOs and OPS is one more factor to take into account when evaluating the company and making an investment decision. There are cases of IPOs that have been very profitable and also of OPS that have turned out at very high prices and have meant losses for the investors who attended. As a consequence, it is important to assess each specific case.

You have to be very careful with those IPOs in which the owners sell 100% of the shares. In these cases, as is logical, the shareholders will try to sell at the highest possible price because they are not going to remain in the company's capital and they do not care about its future evolution.

Also, if they sell 100% of the business, they may find that the business is not as profitable as it used to be. It must be taken into account that generally those who know a company best, and its value, are its owners and directors.