The enormous number of IPOs at whopping high prices reminds us of some past forgotten lessons.
IPOs makes Promoters Rich!
The price of Rs. 10 face value shares are listed at Rs. 100 to 1000 thereby leading enormous wealth creation for promoters. This is definitely the reputation of their brand. IPO Launchers will be calculating their Market Value to determine the IPO Pricing.
IPOs seldom make Investors Rich!
However, the IPO Investor may not be likely get rich through IPOs – as bigger the brand lower will be their allocations. IPO will be Over-subscribed & Investor get Under-allocated.
IPOs are Bad for System!
The high priced IPOs X multiplied by the Number of IPOs are literally drying-up Liquidity out of the system. So this will stop the Value Companies from going up & also crumbles the protection during bear markets.
Reliance IPO 2008
During 2008 Reliance Power came with a whopping big IPO of 11000 Crore and it was Over-subscribed 72 times that people got only less quantity of what being applied for. Later what happened is history, a market crash occurred on Jan 2021 and lack of liquidity lead it to deeper crash.
What we learned from IPOs?
Most of the Value Investors stay way from IPOs due to the following reasons:
- Most of the IPOs are over-valued
- Not enough Financial Data to Evaluate an IPO company
- Good IPO Companies are under-allocated
- IPOs seldom makes people rich
- Use your Cash only to buy Value Deals
As Jhunjhunwala said, We don’t need to be there in all parties in the city!
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