Jun 15, 2000|
Dot.coms - The next IPO boom
First it was finance companies. Then came software firms. Now it is time for dot.coms to dominate the IPO market.
Rediff.com finally hit the markets (NASDAQ of course). The dot.com raised over US$ 55 m by selling 4.6 m shares at a price of US$ 12 per share. The stock, which opened at a premium of 83% to offer price, ended the day at US$ 19 5/16, a 61% premium. The great Indian dot.com race has now been officially declared OPEN!
Indian markets have a knack of going ahead of themselves whenever an opportunity presents itself. In mid 90s, it was the finance companies. Not a day went past without at least one finance company accessing equity markets. The issues were made at huge premiums. Today most of the companies have either disappeared or shut shop. Some, in the first place (when they went public), did not exist.
Next was the boom in information technology stocks. Buoyed by high valuations in secondary markets a large number of technology companies went public (Regulators eased guidelines for accessing markets in their wishful thinking that such a move would help entrepreneurs capitalize on this new business opportunity). A number of them turned out to be dud issues (many turned in excellent returns) resulting in massive losses to investors. Post correction, the number of issues hitting the market has dwindled dramatically.
Now it is time for the dot.coms to take over the IPO market. With the NASDAQ having assigned a valuation to Rediff.com a number of Indian companies would be looking at going public, most in the domestic markets (as they would fail to comply with US GAAP). It is time for investors to get ready to go shopping. However, do not be surprised if there is a repeat of earlier experiences. Then as one eminent economist said, it would not be unusual to use words like 'amazoned' or 'qualcommed', referring to an instance where an investor has lost his money that was invested in a dot.com.
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