Curated by: Business desk
Latest version: December 04, 2023, 3:13 pm IST
Before making any investment one should be aware about the activities of the company.
Gaurang Shah, senior vice president at Geojit Financial Services, noted that profit booking is common after listing gains in IPOs.
The process by which a private firm can go public by selling its equity to the general public is called an initial public offering. A new startup or an established business can list on an exchange and thus go public. IPOs are often a dependable source of investment for those aiming to make money from the stock market. However, investors face a dilemma when it comes to IPOs. Many investors have the question whether they should exit by selling the shares on the day of listing or hold on to the shares for higher gains in the event of a good re-listing. We tell you what strategy should be adopted in future after listing shares in IPO pros and cons.
Gaurang Shah, senior vice president at Geojit Financial Services, notes that profit booking is common after listing gains in initial public offerings (IPOs). The investor’s perspective is important here, as many investors sell their shares only after significant inventory gains. However, profitable listings require some consideration if listing profits are not your primary goal. According to Gaurang Shah, the company’s operations, prospects, IPO size and valuation all play an important role in determining what happens to the shares after the company’s listing.
Before making any investment one should be aware about the activities of the company. The nature of the company’s offerings and its position within the relevant industry must be understood. It implies that if the business is successful on all these fronts, it will continue to grow and this will affect its revenue.
According to Gaurang Shah, one should think about a valuation before submitting an IPO application—that is, whether the price at which the firm is presenting the issue is fair. You’ve probably seen for yourself how many companies’ shares can drop as much as 10% after their listing. The main reason is the high valuation.
In this case, high valuation refers to the situation where a company’s price-to-earnings ratio, or how much it is earning, determines its PE, and future earnings prospects also influence valuation growth. Because of this, no matter how much the business expands, some businesses exhibit high valuations even after considering their growth potential. SEBI agrees with the issue of overvaluation in this regard and plans to look into it. Ordinary investors can verify company valuations by learning various expert views and media reports. Only then should you choose to invest in IPOs.
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