How to remain alert from IPO bait !

In recent times a number of shares got listed into Indian stock exchanges through IPO (initial public offering). Getting allotment through IPO is generally very profitable with a number of shares listed at high premium. But at the same time, these IPO can work as a bait for the new investors. There are risk of losing the investment amount through false companies data / information.

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An IPO (Initial Public Offering) can act as a "bait" for new investors because of the hype and potential for high returns often associated with newly public companies. The market often generates significant buzz around a new company going public, creating a sense of urgency and excitement that can lead investors to invest without thorough due diligence. In some cases, underwriters might artificially inflate the IPO price to generate higher returns for themselves, which can negatively impact the long-term performance of the stock for new investors.

Do not chase hype!

Nowadays, the stock market has seen an increase in companies using speculative tactics to manipulate facts, financial data, and even accounts. Ultimately, shareholders pay the price when the stock price starts declining after the discovery of these issues. Here are some simple warning signs to help you avoid trouble:

• Sudden Increase in Investor Meetings : It's worth questioning the reason behind this sudden attention and increased analyst coverage of the stock. (e.g. Infibeam Avenues, Zomato)

• Frequent Adjusted Earnings : When a company keeps calling losses or extra expenses "one-time" or "exceptional," it might be hiding its real financial health. (e.g. Zee Entertainment)

• Lavish Spending on Luxuries : Unnecessary spending on luxury perks like private jets shows poor money management. (e.g. Kalyan Jewellers)

• High Fees Paid to Auditors for Non-Audit Work : It raises questions about the company’s transparency. (e.g. Manpasand Beverages)

• Overactive CEO on Social Media : It can lead to controversies and a lack of focus on running the company. (e.g. Paytm, Ola)

• Frequent Resignations of Key People : It’s usually a sign of deeper internal issues. (e.g. Ola)

• Unqualified People on the Board

Better safe than sorry! Before investing in any IPO, thoroughly analyze the company's financials, business model, competitive landscape, and management team. Consult with a financial advisor before making any significant investment decisions related to IPOs.

In good faith - Peace!!

Posted Using INLEO