10 Things to Consider Before IPO Buying

There is no doubt that the current year & last year is for IPOs. From January 2021 to date, 53+ new companies have sold their introduced there IPOs. 70% of them are still showing good profits. So the question naturally arises, what is wrong with applying for a new public issue?

Let’s understand.

List of 10 Factors keeps In Mind Before IPO Buying

1. The first misconception: Apply for each new issue and sell it on the day of listing if you have a share allotment. While 70% of IPOs are profitable, only 30% are in loss. If you have an IPO allotment, sell it on the first day of listing and you will make a profit.
2. On the other hand You are not sure that you will win allotment of shares as the demand for shares is soaring. The stocks that are expected to make huge profits at the time of listing are usually not available to you, and what you get is, It is more likely to be ‘listed’ at a loss. So even though the profit ratio shown above is 7:3, in reality we have to depend on luck.
3. The third question is that even if the shares are received by mistake there is no guarantee as to price will go up in the stock market. There is no guarantee that the share price will go up on the day of listing.
4. As the stock market continues to rise, new IPOs will be issued and each IPO will be priced higher. After a couple of big issues, the interest in IPO listing will stop and new shares will be available again at reasonable prices. Apply exactly at that time.
5. Shares should not be sold until at least a quarterly result is obtained if you get a well-rated and recommended IPO. If the result is better than expected, the price will go up.
6. The industry in which the new IPO is coming should look at whether the industry is currently booming or declining in stock market.
7. The average small investor does not read the prospectus of an IPO. Decides whether to apply by looking at the gray market premium. He should keep in mind that this premium is very fleeting.
8. Don’t apply for a new IPO by taking out a loan.
9. In a year and a half, the share price starts coming down to its actual value. Shares of Sterling wilson Solar were offered at Rs 786 in 2019. Today’s price is 401 rupees! Shares of Spandana Sphoorti, which was offered at Rs 856, were listed at around Rs 1335 but are now at Rs 424.
10. If there is a new issue in a sector that is not on the Indian stock market and at the same time has a successful history in the US market, that stock must be pursued. E.g. Shares like Nazara Tech, Nayaka etc. are worth taking to lower prices.

Conclusion

Every year a lot’s of IPOs come to the market for listing. It would be a mistake to assume that every upcoming IPO will bring you a huge return. Before IPO buying, it is important to consider the current stock market situation and the company’s history.

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