{"id":1770,"date":"2021-12-06T08:42:33","date_gmt":"2021-12-06T08:42:33","guid":{"rendered":"https:\/\/investopert.com\/?p=1770"},"modified":"2021-12-06T09:19:47","modified_gmt":"2021-12-06T09:19:47","slug":"robo-advisory-for-your-investments-is-it-the-right-choice","status":"publish","type":"post","link":"https:\/\/investopert.com\/?p=1770","title":{"rendered":"5 THINGS TO CHECK BEFORE INVESTING IN AN IPO"},"content":{"rendered":"\t\t
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5 Basic Things To Check Before Investing in an IPO<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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2021 has seen record number of IPOs. More than 40 companies have successfully raised more than $ 9.7 billion of capital via IPOs in 2021. Post pandemic bull run also aided this activity. Investors, particularly retail investors have supported the IPO frenzy. Most stocks have listed at a good premiums, further adding to increased retail interest. Retail investors mostly look for listing gains, which most IPOs have successfully delivered until recently when the PAYTM IPO tanked nearly 27 % from the offer price eroding shareholder wealth.<\/p>

While we cannot accurately explain all market events, many of which are driven by herd mentality & investor sentiments, we can as investors study at least some basic facts of the company prior to putting our money into its IPO. Let\u2019s learn 5 basic things to study prior to investing in an IPO.<\/p>

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1.Understand the company business<\/strong><\/p>

Firstly things first, KNOW YOUR COMPANY. Legendary investor, Warren Buffett, always propagates \u201cInvest within your circle of competence.\u201d<\/strong> Always invest in those companies whose products or services you understand. It is not expected that you understand all the technicalities of that industry but it is always good to know what business the company is involved in, the products or services it offers, its competitive advantage, any existing legal or regulatory challenges surrounding these products\/services.<\/p>

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2.Study the past performance of the company<\/span><\/p>

Investors must study past performance of the company. This is available in the draft red herring prospectus. Major Factors to study here are, how long the companies been doing business, what is its top line, is it a profitable company (has the company made operating profit in the past years), how much debt the company as on its balance sheet, are there any contingent liabilities, pending lawsuits etc. against the company. If you find the prospectus too technical, you can go through the plethora of videos, blogs, write ups available online on popular websites & channels.<\/p><\/div>

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3.Know your promoter\/management background<\/b><\/p>

As investors we must know the promoter background, their qualifications etc. Recognized names add a certain credibility to the issue and therefore, add a premium to the price as well. A higher percentage of shares held by institutional investors and banks could be a positive sign, indicating their confidence in the company.<\/p>

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4.Future Plans<\/span><\/p>

We must understand what the company intends to do with the money that it will raise from the IPO. Is it only to repay debt or for expansion purpose. Again, the prospectus will provide information on what is the purpose of raising capital thru IPO. If the purpose is just paying off debts, then its best avoided. A healthy sign is usually paying off existing debt as well using for future expansion. However, most of the funds raised through IPOs are used to offer an exit to existing PE or VC funds or existing shareholders and promoters.<\/p>

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5.Technical Factors<\/span><\/p>

It is also worthwhile to study some technical factors like the size of the IPO (generally larger the size, lower the listing premium), anchor subscriptions (which banks, FIs & mutual funds have invested \u2013 healthy share amongst them lends more credibility), overall subscriptions (higher the demand, higher the expected premium as well as one can expect healthy buying even post listing)<\/p>

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So Folks, next time don\u2019t forget to do your homework before you put your hard earned money in an IPO.<\/p>

To know more about upcoming IPOs and other investing avenues drop us a mail at info@investopert.com<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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\n\t\t\t\t<\/i>Prev<\/span><\/span>Previous<\/span>ROBO ADVISORY FOR YOUR INVESTMENTS – IS IT THE RIGHT CHOICE?<\/span><\/span><\/a>\t\t\t<\/div>\n\t\t\t\t\t\t
\n\t\t\t\tNext<\/span>HOW TO INVEST IN CHOPPY MARKETS? PART 1 -MUTUAL FUND INVESTMENTS<\/span><\/span><\/i>Next<\/span><\/span><\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

5 Basic Things To Check Before Investing in an IPO 2021 has seen record number of IPOs. More than 40 companies have successfully raised more than $ 9.7 billion of capital via IPOs in 2021. Post pandemic bull run also aided this activity. Investors, particularly retail investors have supported the IPO frenzy. Most stocks have listed at a good premiums, further adding to increased retail interest. Retail investors mostly look for listing gains, which most… Continue reading 5 THINGS TO CHECK BEFORE INVESTING IN AN IPO<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_joinchat":[],"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/investopert.com\/index.php?rest_route=\/wp\/v2\/posts\/1770"}],"collection":[{"href":"https:\/\/investopert.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/investopert.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/investopert.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/investopert.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1770"}],"version-history":[{"count":10,"href":"https:\/\/investopert.com\/index.php?rest_route=\/wp\/v2\/posts\/1770\/revisions"}],"predecessor-version":[{"id":1780,"href":"https:\/\/investopert.com\/index.php?rest_route=\/wp\/v2\/posts\/1770\/revisions\/1780"}],"wp:attachment":[{"href":"https:\/\/investopert.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1770"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/investopert.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1770"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/investopert.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1770"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}