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On This Day - 19 JULY 2011
Is the IPO market in a state of crisis?
In this issue:
Was Infosys more trustworthy under Narayan Murthy when it came to financial reporting?
Do you see it any differently under K V Kamath?
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There has been considerable lack of investor interest too. Investors have been nursing a lot of grouses against IPOs. They contend that issuers and bankers are too greedy, fees are too high with no transparency, the syndicates of banks brought in to sell an issue are too big, advisers and issuers are in too much of a hurry and more importantly the IPOs are overpriced. Investment bankers, not surprisingly, are bringing out their version of the story. They are of the view that investors' expectations of prices are too low. And that they are not making efforts to assess the management of companies before the latter come out with their IPOs.
That may well be the case. But the argument that IPOs have been overpriced is not without merit. We have seen instances like these in the Indian IPO market as well. Companies and their bankers have come out with issues that have been unrealistically priced. This has been with the hope that optimistic market sentiments will justify the high price that they have been charging. But investors are also becoming a savvy lot in India at least. Earlier, the lure of listing gains resulted in money being poured into overpriced IPOs. But over time, various problems of some of these companies came to the fore, which resulted in share prices coming down. Therefore now, investors are vary of putting their money into IPOs at the drop of a hat and very rightly so! At the end of the day, whether in India or in the world markets, investors have to take into account the quality of the management, the long term growth prospects of the company and the right price before they consider investing their hard earned money into public issues.
Data Source: The Economist
The employment is growing only slightly faster than the labour force. The Wall Street Journal reports that the employment rate would still be at a high of 8.9% in June 2012 and it won't reach 5% till December 2024. With the US economy seeing no signs of a sustained recovery, we wouldn't be surprised to see another round of monetary easing to boost sentiment.
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