FRENZY OF IPOs – IT’S A GOLD RUSH!

about 7 months ago
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So many stocks to buy but so little money!

That seems to be the state of mind for majority of investors, especially the younger and newer lot which have joined by hoards during this pandemic.

Not just the secondary market, the IPO or primary market is booming like never before. Take a look at the table given below and we can clearly see that issues are not only making listing gains but most have managed to sustain the gains, stay over the IPO price. We have taken issues starting from Oct till date and all of them, barring two are in the green.

All these IPOs have one thing in common – the subscription is huge and that means listing gains are bound to be huge too. The state of IPO subscription and the listing gains move in tandem. We do not cover the Grey Market but that is trend too – higher the premium in the Grey Market, naturally, higher is the listing.

Earlier we saw that IPOs which had big HNIs or QIBs participation, the listing gain was high but later, the price fizzled out. This time around, we see that despite the high participation, the price remains well over the IPO price. And this is for IPOs which in terms of fundamentals and pricing are a complete mismatch.

So, then how come the IPOs are doing so well, defying all sense of logic? See, the connection here – secondary market also in same mode, which means it’s the same investing psyche. The fact, over and above all fundamentals, pricing, response to IPO is that there is simply just too much money chasing too little stocks.

There is ample money in the hands of people, all three categories and they are on the look out for better values; that’s why this fixation for IPOs as they feel they need to catch em’ young! Plus there is the FOMO factor – Fear Of Missing Out. What if they refrain and then the stock zooms, doubles up?

Also, there is a huge class of new investors – young, professionals and first-timers. They have money and after having got the hang of making some money in the secondary market, they are emboldened enough to make the same magic work in the primary market.

Little wonder then that there is a growing list of IPOs lining up to try their luck in the primary markets. Everyone hopes that theirs will be as good as or better than Happiest Minds or the Burger King IPO.

What does a small investor like me and you do then? Best never to get caught up in this “gold rush” kind of psyche. If you have the risk appetite, you can safely make listing gains but if you are looking at long term, portfolio kind of stocks, best to wait for the prices to come down, settle down at realistic levels and then buy.

Remember, it is always the small investors who lose money; the big fishes always swim away to safety.

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