1) If everyone is buying then why not me? - Going with the herd is the biggest reason for retails investors to apply for IPO. Reliance Power remains a historic example of how a prospective IPO turned into a losing proposition for crores of investors. An investor should refrain from following the crowd but rather focus on fundamentals and business prospects of the target IPO company.
2) IPOs Outperform Peers - Another misconception is that IPOs are better buys than already listed competitors. However, the past record does not validate this point. In fact, already listed companies are more reliable as they already have a track record of their performance, which should serve as a good starting point for initiating investment.
3) All IPO companies are financially strong - An absolutely wrong perception. Not every company going public has financial strength. There are many companies, which do not have strong balance sheets, and yet they go public to raise funds in order to continue even basic operations.
4) IPO is at an attractive value - A company might have already distributed its shares to a bunch of big investment firms and institutional investors for a lower price through a private placement. Hence, it is not necessary that an IPO price means best price to get into a company. There are higher chances that other big investors might have already be in for lower prices and have already made profits by the time IPO is launched.
- Save upto Rs.2.67 lakh with Pradhan Mantri Awas Yojana ...Know more
- Now Save Rs.3150 on your Demat Account ...Click here
- Now get IIFL Personal Loan in just 8* hours...APPLY NOW!
- Get the most detailed result analysis on the web - Real Fast!
- Actionable & Award-Winning Research on 500 Listed Indian Companies.