IPO

Should you invest in IPOs?

Posted by | Food for thought, Indian Markets, Investing Framework, Investing wisdom, Investment Gurus, IPO | No Comments

There are two kinds of Initial Public Offering (IPO) –
1). Fresh Issue where new shares are issued and money raised goes to the company which can be used for growth or retire debt and
2). Offer for Sale where existing investors (promoters and private equity) sell their shares and money goes to them rather than the company.
Unlike earlier times when most IPOs were a fresh issue in order to raise growth capital, now most issues these days are Offer for Sale. During rapid growth phase companies go to private equity firms for capital and after achieving reasonable scale comes up with an IPO at rich valuations, leaving hardly anything on the table for new investors, to offer an exit to private equity.
IPO is a seller’s market, they

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