Yes, pretty much every one. The IPO is created by the investment banks managing it, and a 25% discount is applied to the anticipated price of the offering, so that it will go up. Prior to 1997 and all the structural changes in the markets, which shifted them from long-term investment focused to short-term trading focused, this “pop” in price initiated liquidity via retail trading, and was used a a measurement of the quality of the offering. However, in today’s big bank/big buyer reality, you’ll see 200% or more of the issue sell on the first day, with the original buyers pocketing the 25%, 60% or whatever is the increase in price. Soon after, the price will level, and then at the 6-month lock up period expiration when insider stock holders (founders, employees, early investors) can sell their shares, short-sellers will anticipate this liquidity, which without ample buyers waiting, will create a drop in price. Their short selling will magnify this drop. This classic “pop and drop” scenario is followed by nearly every IPO after then internet bubble crash.
Thanks for the A2A Yogesh Lohar.
No, not all the IPOs witness a bumper opening on the first day of listing. Companies whose shares have a massive demand due to robust business model and revenue growth are likely to be more attractive than the others.
I suppose your question is in reference to the recent listing of Indian Railways Catering and Tourism Corporation (IRCTC) on the NSE & BSE.
Let’s have a look at the IPO data for the past 2 years.
- In the year 2017 a total of 36 stocks got listed on the exchange, out of which 17 stocks are trading below there issue price. Prominent listings of the year were DMART, HDFCLIFE, SBILIFE, ICICILOMBARD, CDSL, BSE LTD.
- In the year 2018 a total of 25 stocks got listed on the exchange, out of which 12 stocks are trading below there issue price. Prominent listings of the year were HDFCAMC, RITES, ICICISECURITIES, BANDHAN BANK, HAL LTD.
- In the year 2019 only 13 stocks got listed on the exchange so far, out of which only 1 stock is trading below its issue price. Prominent listings of the year are IRCTC, POLYCAB, INDIAMART.
A lot depend on how the IPO is marketed and how popular is the brand among the retail investors. Institutional investors and QIB’s have a thorough look into the companies balance sheet.
Trading into the right IPO can easily make you a quick buck and holding onto the stocks can also multiply your wealth exponentially.
I’d suggest you to read IPO analysis on websites like BloombergQuint and Moneycontrol to get an understanding about the company and its financials.
[1] NSE PAST IPO ISSUE
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