Ruling on investing in IPO shares in the stock market
Fatwa No: 296680

Question

I want to know about investing IPO share in stock market according to Islamic Law. Please let me know Halaal or Haraam about investing IPO share.

Answer

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad  sallallaahu  `alayhi  wa  sallam ( may  Allaah exalt his mention ) is His Slave and Messenger.

If the conditions and requirements set by the Sharee‘ah are observed in that Initial Public Offering (IPO), then there is no harm in it. There are two requirements for deeming trading shares lawful, be it IPO shares or any other ones:

First, the activities of the company must be lawful.

Second, the money, or any part of it, must not be deposited in Riba-based banks to be invested so that the interest is paid to the shareholders; this consists in depositing money for interest, which is forbidden, regardless of whether the person deposited it himself or the company for which he owns shares did it.

Please refer to Fataawa 257350 and 1241.

Allaah Knows best.

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