Initial Public Issues (IPO) are the first sales of stocks by the company to the general public. The key reasons for IPO are- Need of money for expansion, paying down debt, get reasonably inexpensive promotions ( by getting coverage by media and stock analysts) and as an exit route for insiders, angel investors and Venture capitalists.
There is a key difference in mindset of 'growth investors' and 'value investors' while thinking about IPOs.
Value Investors believe that the last reason is the key reason for IPOs. And that's precisely the reason we see more IPOs in bull markets and very few in bear markets. And they prefer to avoid IPOs reasoning Its Probably Overpriced!!
While 'growth investors' believe New is the fancy and they try to catch the fancy and make money in the process.
So who's right?
If we look at BSE-IPO Index since inception in May 2004 and compares it with BSE- Sensex till now, we can clearly see that IPO Index has been under performing Sensex.
So, Value Investors seems to be making a good point.
Better to avoid IPOs!!!!
There is a key difference in mindset of 'growth investors' and 'value investors' while thinking about IPOs.
Value Investors believe that the last reason is the key reason for IPOs. And that's precisely the reason we see more IPOs in bull markets and very few in bear markets. And they prefer to avoid IPOs reasoning Its Probably Overpriced!!
While 'growth investors' believe New is the fancy and they try to catch the fancy and make money in the process.
So who's right?
If we look at BSE-IPO Index since inception in May 2004 and compares it with BSE- Sensex till now, we can clearly see that IPO Index has been under performing Sensex.
So, Value Investors seems to be making a good point.
Better to avoid IPOs!!!!
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