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Posted in Community :

IPO Watch

 
Started by : Jyoti Rath, Sr. Associate, Barclays   12 05 2008 13:46:03 +0000
Industry : Equity Research/AnalyticsFunctional Area : Global Business(Strategy & Execution)
Activity:  21 views;  last activity : 07 06 2010 20:18:09 +0000

There exist several myths about IPOs, which lure the investors into applying for each and every IPO that come in their way. The general perception is that IPOs are a fail-safe way to make money and that if one invests money in an IPO returns are guaranteed. List out the myths about IPO?

 
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1 2 3
1 Guaranteed Profits.
2 High expectations and Blind Trust
3 Weak Company
Ideas in: "IPO Myths"

Guaranteed Profits.

idea posted by Jyoti Rath Sr. Associate, Barclays
I could say if one steers clear of the smaller companies and invests only in IPOs of well-known companies one will make guaranteed profits. This is also not true as we can see that a lot of well-known companies like HT Media, Provogue, OBC, Allahabad Bank, Jindal Polyfilms, These are all big companies and chances are that most investors would have heard of them before the IPO. But still they figure in the list and the most likely reason is that the issue was over priced.
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Yes, though return potential is very high for investments in  ipo it is highly risky. Avoid those areas where you don’t have much exposure for investment purpose.  

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High expectations and Blind Trust

idea posted by Jay Makwana Media Development Manager, Times of Oman

Most of the investors invest money in IPOs thinking their money will be utilised in a professional manner and would generate profits for the company. If the company makes profits Share prices will increase and they can make good gains in reselling. So when companies with proven track record come up with IPOs people invest their hard earned money without a second thought...Look at the example of Reliance Power...there was just blind trust and high faith in Anil Ambani. What have the investors got is best known to all...

When the market was booming lot of people earned good profits and there was a blind faith in investing through IPO..

 

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Weak Company

idea posted by Deepika Malik Associate, HDFC Bank
I think many IPOs will result in losses for the investors, the prices of the same will go down because of several reasons like a weak company, over pricing, weak management or simply because the price fell along with the general markets
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