There is a renewed interest in IPOs once again, and some of them have oversubscribed quite a bit lately. I was wondering what the cause of this is, and if people have really started to make money on listing gains again.
So, I took all IPOs that have come out in India this year, and saw how they performed at the end of their first trading day. The results showed that while most IPOs made money, they didn’t gain by a lot. Since most people get a fraction of stocks that they apply for – in absolute terms investors wouldn’t have made a lot of money.
It also showed that a good percentage of these IPOs were graded 2 out of 5, which shows below average fundamentals, but some of the biggest listing gains were on stocks in this grade. There were just a few that were graded 4 out of 5, but they didn’t show any spectacular gains. This is probably due to the fact that when an issue is graded – price is not considered a factor, so the IPOs with better fundamentals were priced higher initially itself.
What this data doesn’t show is how these stocks did post listing, and there I saw that some stocks with a lower grade tend to fall quite a bit following their listing, but that post is for another day.
Looking at this info-graph, I can’t really make out the reason behind the renewed interest because the results are at best mixed, and this interest is possibly more due to optimism than anything else.
The greener the shade, the higher the listing gain, and red means losses. You can hover over any square to see more details on it.