Are 'well timed' IPOs for you?
In this issue:
» BRIC economies to outpace the US
» Middle East unrest gets to Indian banks?
» India Inc needs to revamp business practices & be ethical
» Corporate India on a shopping spree
» ...and more!
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But off late PE funds are investing in those companies that are waiting to be listed but have not done so yet. That's right. The PE funds are now investing heavily in companies that have postponed their IPO plans due to volatile markets. So one would ask as to how the PE funds would make money in such conditions. Well, they buy a stake in the company at valuations that are much cheaper than the company's planned IPO price band. This way, when the market stabilizes and the company goes ahead with its IPO, the PE fund would still earn a substantial return on its investment.
As per a leading daily, almost 79 companies have filed their IPO prospectuses in the past one year but have not gone ahead with their IPO plans due to market volatility. However, as many of them were planning an IPO to raise funds to meet expansion needs, they did welcome the PE investors. However, the PE funds gave them cheaper valuations than what they had demanded in the IPOs.
But we wonder as to whether these companies are actually good investments for the general investors. They happily lapped up the funds from the PE investors despite the fact that the latter insisted on lower valuations. And now whenever these companies come up with their IPO, it would definitely be at higher valuations, which the PE funds would insist upon. So who would gain out of this entire process? The company and the PE fund for sure. But what about the investors? They may just end up getting stuck with an extremely expensive stock. IPOs that are for whatever reason 'timed' as per market sentiments are almost always bad for retail investors.
Do you think 'well timed' IPOs are worth investing in? Share your comments with us or post your views on our facebook page.
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Private sector lender Yes Bank has decided to withdraw the application it had filed to seek RBI's approval to open a branch in Bahrain. Canara Bank too has postponed its entry into the country. The largest public sector lender SBI already has two branches there. As a result of the crisis, it has relocated its Bahrain branch employees temporarily and also stopped routing fresh non-Bahrain business through that branch. It appears that the political tensions are going to keep banks and other investors away from this region for a while now.
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We have made enough mistakes. It's time to realign moral standards. At this moment, India's highest economic need is higher ethical standards. The recent warning is the first step. The immediate next being a stringent code of conduct and business standards to make sure that companies follow codes in letter and spirit. Without that, it is mere rhetoric. As India gears up for the trajectory to 9% GDP growth rate, sound corporate governance is the harness without which every leap could end up in a great fall.
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However, there is a word of caution here. We as individuals tend to indulge in unnecessary shopping when we have lots of cash. In the same manner, these companies also need to ensure that they do not end up buying unprofitable businesses.
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04:55 | Weekend investing mantra |
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8 Responses to "Are 'well timed' IPOs for you?"
Harshal Shah
Apr 10, 2011IPOs anyhow will be priced higher than what the initial investors have paid. So it seems that all IPOs carry this risk for the small investor. The important thing is the returns that small investors can make after investing in the IPO
Rom
Apr 10, 2011Last year's IPO's were allotted at the highest end of the
price band. The volatility of the market since then has
eroded whatever the individual investors received by way
of the 5% discount. So SEBI must please stop this drama
and facilitate the non-speculative long term individual
investors.
Surineni Sudhakar
Apr 10, 2011On Conduct & Corporate Governance :
India is a fanatastic country. We have lawmakers, law enforcers and the judiciary system - all corrupt. But the wage earner and the wage provider should not be corrupt.
What any of the world cup cricket team members did to increase the GDP of the country or reduce the prices / inflation.
Governments are showering them with rewards and rewards - who are already stinkingly rich.
Has any of these cricketers made one contribution to any charity????
A tax payer has bought to the semi and final match tickets paying exorbidant sums of tax-paid money. He is not given any reward or tax-concession 80cc/80cccc.
but the looters (organisers ICC) gets the tax exemption - is it because they will fill the coffers of .....?????
Long live cricket - long live India.
We need - not 1 Anna Hazzare but a 1000 (Hazzar) Anna Hazzares to cleanse the system
hg d sha
Apr 9, 2011IPO OR FPO BOTH ARE NEXUES BETWEEN PROMETER-OPERATOR-BROKERS AND-PE INVESTORS.IT SHOULD BE LOOKED INTO BY SEBI
TO PROTECT THE RETAIL INVETORS.
atul
Apr 9, 2011IPO'S are for gamblers & not for investors.No right minded person should apply for IPO.I will also like to state that most of the business channels misguide gullible lay people into investing in IPO'S.
Shyam.P.Kunte
Apr 9, 2011Tall claims to defend premium in pricing of IPOs while listing of prompters should be asked by SEBI to explain in a more transperant way and then only it can stop getting investors cheated from price rigging.JaiHind
SATYA
Apr 13, 2011So called well timed IPOs are not best for small retail investors.My view is to check the neutral/non biased reviews of IPO and check the business/management credential and wait till last date observe the times of over subscription in retail segment and take a calculative risk decision.Then left it to your luck. Wait and watch the SENTIMETAL(neither fundamental nor technical) of our investors.