* THREAD ON IPO *
DISCLAIMER : MY PERSONAL OPINION.

1/13
It is the season of IPO& #39;s after a recent lull.
#IPO short for Initial Public Offering is a process wherein a Pvt Co goes public by issuing new shares or the existing shareholders sell their shares to new people .
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2/13
The price is decided with the help of a syndicate of investment bankers
via a book building process & the minimum subscription is ensured by the underwriters.
Since professionals decide the issue price , obviously the company is great ,duh https://abs.twimg.com/emoji/v2/... draggable="false" alt="🙄" title="Gesicht mit rollenden Augen" aria-label="Emoji: Gesicht mit rollenden Augen">https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤷" title="Person shrugging" aria-label="Emoji: Person shrugging">! Once listed will https://abs.twimg.com/emoji/v2/... draggable="false" alt="🚀" title="Rakete" aria-label="Emoji: Rakete">https://abs.twimg.com/emoji/v2/... draggable="false" alt="🚀" title="Rakete" aria-label="Emoji: Rakete">
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3/13
With such great dreams we set out & invest heavily .Imagine our happiness when we get allotted 2lots for all our efforts! Yayhttps://abs.twimg.com/emoji/v2/... draggable="false" alt="😃" title="Lächelndes Gesicht mit geöffnetem Mund" aria-label="Emoji: Lächelndes Gesicht mit geöffnetem Mund">!
Oh the imaginary windfall gains ! https://abs.twimg.com/emoji/v2/... draggable="false" alt="💃" title="Woman dancing" aria-label="Emoji: Woman dancing">
Arrive listing day : 6%gains . (UNREALISED obviously! As company is really good .Deserves 30% gains !)https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤷" title="Person shrugging" aria-label="Emoji: Person shrugging">
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4/13
A week into listing, to our horror , we find stock trading below IPO levels! How is this possible! Let me hold onto it .Ek saal main https://abs.twimg.com/emoji/v2/... draggable="false" alt="🚀" title="Rakete" aria-label="Emoji: Rakete">https://abs.twimg.com/emoji/v2/... draggable="false" alt="🚀" title="Rakete" aria-label="Emoji: Rakete">
We become long term investors BY FORCE, NOT CHOICE.
By year end stock https://abs.twimg.com/emoji/v2/... draggable="false" alt="🛬" title="Ankommendes Flugzeug" aria-label="Emoji: Ankommendes Flugzeug">
An example (out of the many) to substantiate +
5/13
The biggest myth around IPO - One can make EASY money !!

These stocks are newly issued & hence not been traded prior. Thus they are less analysed than listed companies with a history. So the risk is considerably higher ,for what is well concealed may stay hidden ! +
6/13
Also the liquidity in the primary market is less as compared to that of secondary market which helps companies package themselves easily to obtain a higher valuation - Hence if observed , IPO& #39;s happen at the peak of business cycle.
No prizes for guessing why ! :))
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7/13
The projections & multiples of price to earnings shown are ridiculous at times ! Understanding the present & more importantly the future prospects of the Co. along with the sectoral headwinds & tailwinds is paramount !
Par apne ko sirf rokda chahiye , analysis nahi! https://abs.twimg.com/emoji/v2/... draggable="false" alt="😬" title="Grimasse schneidendes Gesicht" aria-label="Emoji: Grimasse schneidendes Gesicht"> +
8/13
* WEALTH EROSION HAPPENS MORE OFTEN THAN WE KNOW *

The rally fizzles out sooner than expected.
Some 69 odd companies raised over ₹27,900crore through IPO in 2018 of which 60% of them were trading below their issue prices post the IPO.
Example of erosion given below .
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9/13
Now am not saying the above scrips are bad! The businesses may go on to do extremely well in long term .But from an IPO gain perspective?
Also let& #39;s just focus on the absolute returns + the opportunity cost + any borrowed cost for IPO !
Easy money ?https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤔" title="Denkendes Gesicht" aria-label="Emoji: Denkendes Gesicht">
I think not !
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10/13
Again many do manage to TIME THEIR EXITS TO PERFECTION & MINT MONEY https://abs.twimg.com/emoji/v2/... draggable="false" alt="👏" title="Applaus-Zeichen" aria-label="Emoji: Applaus-Zeichen">https://abs.twimg.com/emoji/v2/... draggable="false" alt="👏" title="Applaus-Zeichen" aria-label="Emoji: Applaus-Zeichen"> ( Almost in all IPO& #39;s that too !! )

But I belong to that category of retail investor who doesn& #39;t get ANY allotment in good scrips / gets peanuts ! Large IPO gains happen in dreams only ! https://abs.twimg.com/emoji/v2/... draggable="false" alt="😔" title="Nachdenkliches Gesicht" aria-label="Emoji: Nachdenkliches Gesicht"> https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤷" title="Person shrugging" aria-label="Emoji: Person shrugging">
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11/13
Other relevant pointers to my limited knowledge :
* Grey market influences the pricing & sentiments largely ( HYPE!)
* Expensive valuations pitched by IB leaving hardly any money on the table .
* Risk-Reward ratio seems skewed.
* Dependant on external factors.
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12/13

*Absolute returns over time diminish due to high initial valuations . Secondary markets makes more sense.

* Applying in too many IPO& #39;s akin to gambling. We might get allotment in the bad ones! Moreover large amt of liquidity needed! Too subjective.
#InvestmentPointers +
13/13
For every Dmart there is a Reliance Power , for every IRCTC there is a S Chand .
Thus a better definition of IPO would be "It& #39;s Probably Overpriced" !

Pls do take this with a bucket of salt! https://abs.twimg.com/emoji/v2/... draggable="false" alt="😇" title="Lächelndes Gesicht mit Heiligenschein" aria-label="Emoji: Lächelndes Gesicht mit Heiligenschein">
@dmuthuk
@Vivek_Investor
@RichifyMeClub
@safalniveshak
@position_trader

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