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Initial Public Offer



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IPO stands for *Initial* Public Offering.

This is the mode using which companies can tap the doors of capital markets to raise funds for their business.

IPO have brought in mixed results so far for retail investors.

While some IPOs are block busters, others flopped.

For instance, the ICICI Prudential Insurance IPO flopped and investors lost money on listing day.

Studies show that only 20% companies are quoting above their IPO price.

80% (mentined above) are quoting under their issue prices out of which about 80% are quoting at 10% of their issue price.

Seeing abnormal and unrealistic pricing of coming IPOs, the same story may repeat.

This is one reason why i avoid IPOs.

Promoters or venture capitalists use it to exit at the expense of retail investors.

Also, there are hardly any unique business models of the companies.

So except for valuation arbitrage, applying for recent IPOs is of no use for retail investors.

Or in other words, you need to study more harder than what you think to be successful with IPO investing.

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