company will be responsible to repay the money of investors in cash share value plunge below the IPO allotment price. Whole compensation will be given by promoters and other organisations who are selling IPOs. Except this, investor can bid for IPO through internet.
Who will suffer the Cost of Safety Net
Companies will allow to pass on the costs of ‘safety net’ provision to the investment bankers, who are primarily responsible for fixing the price of shares to be sold through IPOs.
What is total Time Limit of Safety Net
This ‘safety net’ mechanism is being considered only for the small retail investors, who would be compensated by the promoters and other entities selling shares through IPOs in the event of the company’s shares plunging below a certain threshold limit within six months of listing or the time-frame set by SEBI
Why is Safety Net important for Small and Retail Investors
As per the Market analysts advice that the investor should get the facility of a safety net for IPOs in adverse market conditions. With safety net in IPO, retail investors would feel more secure and comfortable in subscribing to this public issue.