Towards the end of every calendar year newspapers publish statistics on how much money did companies collect in market and how these numbers help in GDP growth and all. After reading an article this year on a similar topic I decided to check the performance of companies that went public in 2019, companies should have executed their growth strategies during this period which theoretically should reflect in numbers
So many analysts analyze these IPOs, discussions on TV channels and other media. Barring one or two companies every other company is a disaster. Covid cannot be the reason for IndiaMart poor performance. IMO, Affle is not very bad, looks like Spandana has not announced previous quarter results. We, the investors have such great expectations, IMO majority of these companies failed to grow. Then my question is, what have managements used IPO proceeds for?
Appreciate others thoughts
I did not follow any of the IPOs you have mentioned, so cannot comment specifically but here is my sense.
I don’t think can we generalize all the IPO companies. Each company mentions about the ways IPO proceeds will be spent. Paying debt, expanding business, general corporate purposes etc.
If the institutions believe both in the ability and the credibility of the management of a company, the stock price may not have moved much but it may not have gone down either.
In the instances where the institutions pulled off quickly, there must have been something fishy, which the institutions did not take into account or may have found later, or simply, such a move by a company is perceived to be wrong.
And in the instances where, the price has fallen much, there could be too much of retail participation from day one of listing, and froth becomes more and more while the institutions decreased their stake.
And the stocks, which have performed exceeding expectations of the street and the management themselves, may have something going on for them, so the demand went up and up defying fundamentals, and this may continue as long as it does.
My idea of this post is to understand the efficiency of IPOs. Companies might use the proceeds of an IPO for growth or repaying the debt or corporate purpose (mostly to increase sales staff to cover new geographies, etc). I would not invest in a company if I know upfront that company will not grow with IPO money, my exercise is to find out why and avoid those companies. Not trying to generalize.
Hope this answers
