Is Being the First-Buyer in IPOs Really a Durable Moat? - Views on News from Equitymaster

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Is Being the First-Buyer in IPOs Really a Durable Moat?
Mar 9, 2017

Dear Valued ResearchPro Subscriber:

Being first, ahead of others, always gives us a sense of high.

Whether it is catching the first-day-first-show of the latest blockbuster movie or being the first one to preview a sale or buying the high-tech gadget just launched, we all want to revel in being on top of the game every time.

Rationalists scoff at this fad as being too risky and pricey at times.

But in case of an Initial Public Offering (IPO), it might be more true than ever.

This is because IPOs are increasingly being used to provide an exit route to promoters and early stage investors in recent years. In 2016, nearly two-thirds of the money raised through IPOs have been offer for sale with only one-third of it being utilized for capital expansion. This means that most of the capital raised is not being invested in the business.

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INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537.

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DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report
  2. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company.
  3. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
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  5. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
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