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I have 1 question. "Why would public decide to invest their money in the IPO of any company?"
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Umm. Good Question
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Well, if the public are well informed about the company's progress and know that in the future (near or not), this company is gonna do well, then they would decide to invest their money in the IPO.
Simply put, during this bull-run (well, I think I can call it so, dontcha?), people are looking at IPOs as a method of making a quick buck. Get shares allocated during the IPO (assume that it has a 70%+ chance of increasing post listing) and sell of those shares for the loot!!
Well, some pointers for anyone who is wanting to go this way -
- There is a 10% short term gains tax which you will have to pay if you sell off your allocated shares within a year (thats 10% of your profits, if any)
- Would ask you to indulge in IPO only if you have money to spare, cos its not necessary that you get your money's worth of shares (this happens when the issue is oversubscribed), in such a scenario, the remaining moolah is returned to you after some time. Can you go without that money?
- Never crib that you sold off your shares instead of holding on to them for some more time because now they are worth much more. Thats just a notional loss, get over it! A good example would be when I had sold off some 100 shares of TechMahindra at 560 ... 2 months later TechMahindra was doing 1000+. Notional loss.
Those are my $0.02