Did you notice the huge number of SME IPO’s in September?
You kept on blocking your funds throughout the whole month on multiple companies?
Still didn’t get any allotment and missed out on listing gains? Here’s why!
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If SME’s miss September deadline, they will have to update their half yearly financial numbers and file it with Ministry of Corporate Affairs, Exchange and SEBI
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Before September 30, it only needs to be filed with the Exchange it is listing on. It is quite easy to do an SME IPO.
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Promoters pay a large operator which in turn pay people to go and apply for the IPO to increase the subscription multiple and hence increase the listing gains. They pay fixed costs to these people and ensure at least 50% of the allotment goes to these particular people.
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Promoters get all the profit diff b/w IPO Application price and listing.
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You would also see HNI’s & QIB’s investing in this IPO’s, both pre and post listing. Their job is just to pump the price up. They have realised huge gains in some other deal and hence they are okay with taking a loss here to offset huge tax payments. Anyways they will get the money in black through the promoters.
My Takeaways and Conclusion:
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Wait for at least 6 months and the results post IPO before investing into risky companies. It’s another story if you got IPO allotted and booked profit on listing day/week. It’s totally risky investing after that when share is giving UC’s for a long time and finally you got your order executed.
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Do not buy into listing gains and purchase stocks hitting continuous UC’s. They will also give continuous LC’s later and you won’t be able to exit.
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Subscription multiple from Retail and HNI does not mean anything. Look at QIB’s.
These companies don’t do anything magical. It is extremely unlikely that they will be the next Google. Large and mid cap players can completely destroy these players. Look what Jio did to Telecom providers and now to ISP’s.
“Oh this company is in and on such low P/E as compared to <Large/Mid Cap well Established stock>, let me buy this instead of the company with proven track record.”
Don’t do it.
Hope this helps you in making wiser investment decisions and protecting your capital.
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