IPO's make a dent in Investor's Coffers

IPO: Initial Profit-less Option

The Year 2008 has so far been a nightmare for investors who have put in their money in the IPO’s. Out of the 22 IPO’s which have been listed during this year, 18 are currently trading at a loss ranging from 2% to 69%. Only 4 IPO’s have managed to swim against the current and trade above their Issue price. Companies like Emaar and Wockhardt had to withdraw their IPO’s.

As a general rule , IPO’s do not do well in the bearish markets. But there were a huge queue of companies who have planned to line up their IPO’s during the dream run on the bourses, but most of them have shelved their plans given the massacre post January. However, few needy ones have shown courage to roll it despite the ongoing state of markets. And to their advantage, they found investor who subscribed to their offerings. Most of these companies have priced their IPO’s on the higher side of the price band even after knowing very well that the investor may not fetch good price post listing.

Investment Guru is of the view that it’s still not the right time to subscribe to IPO’s since the secondary markets sentiments are extremely negative and hence one should forget the hefty premium that these IPO’s used to give till 6 month back. When the best of listed companies are not doing well on the stock market, how can we expect the IPO’s to do well and that too at a premium.