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7 Reasons I No longer apply for IPOs
What is the Fuss?
IPOs (Initial Public Offering) are events that attract investors. Investors invest for listing gains or for long-term holdings. Social Media gets abuzz with articles and videos of the IPO. People track the grey market premium like a hawk. The company going IPO gives several press appearances and interviews. IPOs nowadays seem similar to a big megastar movie launch event.
But does applying for IPOs make sense for long-term investors? Is it all hype and less to no gains? Or is it a once-in-a-lifetime opportunity to become a shareholder of a multi-bagger company?
I have had a fair share of my experience applying for IPOs. And here is my conclusion: IPOs are not worth applying for. Below are seven reasons why. Let's get started.
Reason 1: They don’t all make you money
Investors apply for IPOs to (a) Make Listing Gains and (b) Make Long-term Gains.
Listing Gains are made by applying at the IPO price and selling on the listing day. Listing Gain = (Listing Price — IPO application Price). You make listing gains if the listing price exceeds the IPO price. This does not always happen. In 2022, 35% of IPOs listed at a loss (14 out of 40 IPOs) [Refer to article]. In 2021, 30% of IPOs listed at a loss (20 out of…