I never invest in IPOs!
3 reasons
1) The short term game is difficult
I do not play for listing gains. The whole concept of listing gains relies on market behavior in the short term, and I donβt think the odds are in my favor here.
1/7
3 reasons
1) The short term game is difficult
I do not play for listing gains. The whole concept of listing gains relies on market behavior in the short term, and I donβt think the odds are in my favor here.
1/7
2) Good IPOs get oversubscribed massively
A quality companyβs IPO priced attractively will get oversubscribed massively. So unless I use leverage, the allotment will not make a meaningful change in my life.
2/7
A quality companyβs IPO priced attractively will get oversubscribed massively. So unless I use leverage, the allotment will not make a meaningful change in my life.
2/7
If the company is great, and has a great runway, I can buy it on the listing day.
One could have bought DMart at 600 on listing day, instead of getting a small allocation at 299 in the IPO, if they were convinced about the story. Could have made 6-7 times money in 5 years.
3/7
One could have bought DMart at 600 on listing day, instead of getting a small allocation at 299 in the IPO, if they were convinced about the story. Could have made 6-7 times money in 5 years.
3/7
3) Incentives are not aligned
The key objective of the company issuing shares and investment banks is to maximize the valuation of the company. Unless the company has a vision spanning a couple of decades, they don't really need to tap capital markets very soon.
4/7
The key objective of the company issuing shares and investment banks is to maximize the valuation of the company. Unless the company has a vision spanning a couple of decades, they don't really need to tap capital markets very soon.
4/7
In such cases, why would anyone selling shares leave any value on the table?
Infact, it is odd to assume that the company or I-Bankers will do any charity. They are not supposed to. There is no moral obligation that the banker has to leave money on the table.
5/7
Infact, it is odd to assume that the company or I-Bankers will do any charity. They are not supposed to. There is no moral obligation that the banker has to leave money on the table.
5/7
The buyer has to take care while subscribing.
I mention this since I have been reading a few posts on Mamaearth. One may dislike the valuation, but who is forcing us to apply in this IPO
6/7
I mention this since I have been reading a few posts on Mamaearth. One may dislike the valuation, but who is forcing us to apply in this IPO
6/7
Everybody in capital markets are out to maximize their benefit. And very few companies have a long term vision to price IPOs well.
7/7
7/7
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