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IPO or Initial Public offering is first step of a company for getting into the league of biggies. Some of the IPO's have made investors millionaires overnight while some have been stock market dud. Investor needs to be extra cautious while investing in an IPO and should do a through research about the company and potential of it's management. The best thing which media does in case of an IPO is to create hype and increase curiosity in investors mind. Here is the trap to which investors might fall as prey and invest their hard earned money in IPO which becomes a stock market dud on listing. Many of the IPO's often list at price which is less then the IPO price per share.
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From company perspective : A company has to get lot of eligibility clearances from the market regulator before launching an IPO. Generally share value of any stock is FIX during the time of IPO, they can not changed till stock get listed in exchanges and available for trading. To establish its long term security a business has to go through so many steps before its IPO IPO price has to determine by stock market experts and some economist. in order maintain the balance to raise the capital require by company and its actual value,
Media hype plays an important role during IPO launch for big companies. One common pattern found in IPO launch of big and reputed companies is in case of a large business house IPO , it turns in a an event all media , brokerage house talk about its IPO, even all investors and institution, and brokerage house run for its IPO, So in such boom price tends to move upward only for next few session after that only it comes to its right value. which decide by investors thru. demand and supply game. We have noticed such event in Reliance Power , in which all people related to stock market talked about it. and it turned out to be a market dud. Reliance Power IPO is a classic example that Investors should analyze potential of management before putting their money in a IPO. Where as in case of small companies IPO, Its difficult to predict smaller company IPO, in such case it is advisable to analyse past 1-2 years performance of the company, it's client base and above all analyze potential of Management of the company. You can also consult your Financial Advisor before investing but LiveBombayStockExchange always backs the idea of 'Be Your Own analyst'.
So while concluding this 'guide for IPO investing' it can be seen that investing in IPO can give huge returns for a long term perspective whereas in some cases IPO have become stock market duds on listing, Hence LiveBombayStockExchange backs a strong analysis approach on following parameters :
1. Analyze 1-2 years of company performance and it's balance sheet
2. Analyze potential of the top management of the company
3. Analyze the asset base of the company which wants to get listed.
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