See how the mighty have fallen
Big names that entered the capital markets with premium IPOs are quoting 30-40% below their offer prices.
By Narayan Bhatt, TNN |
AHMEDABAD: High-profile companies like Jet Airways, GVK Power & Infrastructure, Piramyd Retail, Inox Leisure, Kewal Kiran Clothing and Jagran Prakashan which came to the capital markets with huge premium IPOs have on Friday bitten the dust and are quoting 30-40% below their offer prices.
“Out of the 27 initial public offers (IPOs) made since January, 20 of them are today quoting below their issue price,” said Vinod Sharma head of research at Anagram Securities. His advice to investors is to book profits in IPOs and not hold them for the long term. He expects a poor response for upcoming IPOs and many of them may be forced to reduce their premium amounts.
So, it may sound ironical, but the message for investors seems to be that do not hold for the long-term and book profits post-listing in booming markets as the same high-priced IPOs can go below the offer price in bearish markets within a short span of five-six months.
“Out of the 27 initial public offers (IPOs) made since January, 20 of them are today quoting below their issue price,” said Vinod Sharma head of research at Anagram Securities. His advice to investors is to book profits in IPOs and not hold them for the long term. He expects a poor response for upcoming IPOs and many of them may be forced to reduce their premium amounts.
So, it may sound ironical, but the message for investors seems to be that do not hold for the long-term and book profits post-listing in booming markets as the same high-priced IPOs can go below the offer price in bearish markets within a short span of five-six months.
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GVK Power’s stock price has crashed to Rs 155 from its IPO price of Rs 310. Jet Airways price is down to Rs 608 from offer price of Rs 1,100 and a high of Rs 1,344. Jagran Prakashan’s scrip is quoting at Rs 181 as against the issue price of Rs 320.
Booming capital markets had enabled greedy promoters to skim investors to the maximum possible extent. The promoters were aided by equally greedy merchant bankers and public relation firms who stood to gain by way of hefty fees by promising excessively high premiums to the former.
“Easy availability of funds and booming markets had helped many greedy promoters and merchant bankers to over-price public issues, both initial and follow-on,” said market analyst Arun Kejriwal. He said that these people are not concerned about the share price falling below the offer price post-listing as they do not stand to lose. It is the long-term investors who suffer when prices crash below the offer price he added.
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