New on FinoLib · Volume I: Global Economy
I have just published a new article on FinoLib, my free finance education library: IPO Process in the US and India, Venture Capital and Short Selling. It is part of Volume I: Global Economy. Below is a summary of the topic in plain, expert language, so you can follow the idea even before you open the full article.
4.5 The US IPO Process — SEC, NYSE, and NASDAQ
The idea in plain words
The US has the world’s most developed and liquid IPO market, regulated by the SEC, which was established in 1934 after the 1929 crash. Companies file a comprehensive S-1, all SEC filings are public on EDGAR, and companies choose between NYSE and NASDAQ.
Key points
■Under FINRA Rule 2241, underwriter analysts are restricted from publishing research on the company for at least 10 days after the IPO, a rule that does not apply to emerging growth companies.
■US exchanges allow dual-class shares, for example Class A with one vote per share for the public and Class B with ten votes per share retained by founders.
A closer look
The United States has the world’s most developed and liquid IPO market, with NYSE and NASDAQ competing actively for listings. The regulatory authority is the Securities and Exchange Commission (SEC), established in 1934 following the 1929 stock market crash.
Recap
The US IPO market is the world’s most liquid and is regulated by the SEC, created in 1934 after the 1929 crash. Companies file an S-1 that is public on EDGAR, choose NYSE or NASDAQ, and may issue dual-class shares, while underwriter research waits at least 10 days.
4.6 The India IPO Process — SEBI, BSE, and NSE
The idea in plain words
India has one of the world’s most active IPO markets, especially for retail participation. It is regulated by SEBI and companies usually list on both BSE and NSE. Applicants’ money is blocked through ASBA, not taken, until allotment.
Key points
■SEBI was established in 1988 and given statutory powers in 1992.
■If an issue is oversubscribed a lottery decides allotment, and an unsuccessful applicant’s blocked funds are simply released.
A closer look
India has one of the world’s most active IPO markets, particularly for retail investor participation. The regulatory authority is SEBI (Securities and Exchange Board of India), established in 1988 and given statutory powers in 1992. Indian IPOs list on the BSE and/or NSE — usually both simultaneously.
4.7 Venture Capital and Private Equity — The Pre-IPO World
The idea in plain words
Before a company reaches the stock exchange it is built with private money: angels back the idea, venture capital funds the growth and private equity buys and restructures mature businesses. The IPO is the graduation ceremony, when early investors cash out.
Key points
■A private company valued above $1 billion is a unicorn, a term coined in 2013; India alone has produced over a hundred.
■VC firms run on “2 and 20”: about a 2% annual management fee plus 20% of profits as carried interest.
A closer look
The funding ladder runs in named rungs. Bootstrapping (founders’ savings) → angel investors (wealthy individuals writing early checks) → Series A, B, C… rounds of venture capital, each exchanging a slice of ownership (equity dilution) for capital at a negotiated valuation. Cross $1 billion in valuation while still private and you’re a unicorn — a term coined in 2013 when such companies were rare; India alone has produced over a hundred, centered on Bengaluru.
4.8 Short Selling — Betting on Falling Prices
The idea in plain words
Short sellers profit when prices fall: they borrow a share, sell it, buy it back cheaper and keep the difference. Their gains are capped but their losses are unlimited. They are also the market’s fraud detectors, and markets that ban shorting have only silenced early warnings.
Key points
■If a share sold short at ₹100 climbs to ₹1,000 the loss has no ceiling, and forced buying can feed a short squeeze, as when GameStop rose roughly 1,500% in weeks in January 2021.
■Hindenburg Research’s January 2023 report on the Adani Group erased over $100 billion of market value at the trough and triggered Supreme Court-monitored SEBI scrutiny; Hindenburg shut down in 2025.
A closer look
The mechanics: borrow shares (paying a fee), sell them, and hope to repurchase cheaper before returning them. If instead the price rises, losses have no ceiling — a share sold short at ₹100 can climb to ₹1,000. Rising prices force shorts to buy back to stop the bleeding, which pushes prices higher still, squeezing remaining shorts harder: a short squeeze. The definitive case is GameStop (January 2021), when Reddit-coordinated retail buyers drove a heavily shorted, struggling US retailer up roughly 1,500% in weeks, inflicting billions in hedge-fund losses and proving that social media had become a market force.
What the full article covers
In the full article I take you through these sections:
■4.5 The US IPO Process — SEC, NYSE, and NASDAQ
■4.6 The India IPO Process — SEBI, BSE, and NSE
■4.7 Venture Capital and Private Equity — The Pre-IPO World
■4.8 Short Selling — Betting on Falling Prices
It includes worked examples, a recap, a reveal-on-click quiz and the official sources behind every figure.
Volume I: Global Economy
Read the full article on FinoLib
The complete article, IPO Process in the US and India, Venture Capital and Short Selling, with every worked example, diagram, quiz and source, is free to read in Volume I, Global Economy on finolib.com.
Explore the Finance Education Series: Vol. II — Capital Markets · Vol. I — Global Economy · Vol. III — Finance Encyclopedia · Vol. IV — Finance Careers · Vol. V — Personal Finance