2009-12-20

IPO - It's Probably Overpriced

Underwriting of IPOs was easy because IPOs were always underpriced. Shares always went up upon getting listed. Bankers got decent underwriting fees. Customers were certain of profits. Promoters did not mind because follow-up offers would not be difficult and in any case they were not selling out completely. Everybody was happy. Underpricing was structural.

Things have changed. Recent IPOs have consistently underperformed (= hence overpriced). What is happening? This way, bankers would it difficult to underwrite; investors would get jittery; promoters can't raise money as easily as they wish to. Expect -
  • bankers' fees (which have already gone down) to (further) go down
  • auction system to slowly catch up
  • QIPs to do well
PS: Source - The Economic Times

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2009-12-20

IPO - It's Probably Overpriced

Underwriting of IPOs was easy because IPOs were always underpriced. Shares always went up upon getting listed. Bankers got decent underwriting fees. Customers were certain of profits. Promoters did not mind because follow-up offers would not be difficult and in any case they were not selling out completely. Everybody was happy. Underpricing was structural.

Things have changed. Recent IPOs have consistently underperformed (= hence overpriced). What is happening? This way, bankers would it difficult to underwrite; investors would get jittery; promoters can't raise money as easily as they wish to. Expect -
  • bankers' fees (which have already gone down) to (further) go down
  • auction system to slowly catch up
  • QIPs to do well
PS: Source - The Economic Times

No comments: