Asia’s oldest bourse BSE (Bombay Stock Exchange) listed at a hefty premium to the offer price on Friday.
Against the offer of Rs 806, the stock was listed at Rs 1,085 a 35-percent premium. It hit a high of 1,200 in early trade.
The share listed at a 35% premium, went as high as 49% and eventually closed the day 33% higher.
Most IPOs aren't any different from lottery tickets. What makes greedy promoters and cunning investment bankers salivate is that unlike a lottery, the size of the jackpot is not known in advance.
There's no guarantee how much an investor can earn by investing in the IPOs. And this leaves the ground open for irrational price fixing. The jackpot promised is usually much larger than deserved based on fundamentals. And then when the dust settles, the fate of investors isn't very different than all the lottery buyers put together.
Warren Buffett sums it up best.
- It's almost a mathematical impossibility to imagine that, out of the thousands of things for sale on a given day, the most attractively priced is the one being sold by a knowledgeable seller (company insiders) to a less-knowledgeable buyer (investors).
from Equitymaster.com
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