How I Lost 0.2 Lakh in IPO !!!!

You guys might be knowing what is IPO?

If not let me tell you, an initial public offering, or IPO, is the first sale of stock by a company to the public. A company can raise money by issuing either debt or equity. If the company has never issued equity to the public, it's known as an IPO. Companies use this money for growing their business.

I am telling this of 2010 instance.

I bought coal India IPO and made ample listing profit. After getting confidence I bought one more IPO which came in the year 2010.That stock name is CommercialEngineers and BodyBuildersCo.  This company is  into railway projects .

The IPO Issue Details as below:

Number of shares: 12.24 crore shares

Issue duration: 30th September-5th October

Issue Price: Rs125 - Rs127 per share

Face value: Rs10 per share

Minimum order quantity: 55 shares

Listing: BSE, NSE

Lead book running managers: ICICI Securities Ltd and Edelweiss Capital Ltd

I did some of my initial analysis and applied for 4 lot of this. Those day it was allowed to apply for more than one lot for IPO.

The IPO got listed and I got all the 4 lots. Then I did not book my listing profit because share has not shown much appreciation.

Same year December I went to my native for my sister’s marriage. I returned somewhere in the mid of December .After coming I checked the health of my IPO .

To my surprise it was crashed to somewhere between Rs 30-40/- as far as I remember.

It was a serious jolt for me .Almost I lost 1/4^th of my initial investment. For couple of minutes my brain stopped working. Then I decided to do some more analysis of the stock in order to know the reason behind this type of fall. I got to know the company is not in a good shape as far as fundamentals concerned. And I did not want to sit for further loss. Immediately after my analysis I sold all of them at the current market price then Rs48/-. A hefty loss of Rs 0.2 lakh!!!!

After that I started analyzing the fact why I got tremendous profit in one IPO (Coal India) where as severe loss in another (Commercial Engineering)

I have recently started studying the book “Value Investing and Behavioral Finance” of My Parag Parikh where he minutely explains about IPO investing.

I am writing all of my understanding as below:

Ø   All IPOs generally come in Bull Market and hardly in Bear Market .Because most of the companies want to make quick money out of IPO by cheating investors. Though not in all the cases but in maximum cases. The notion that IPO is investment friendly and it will help investors to make quick money is big mental common sense chemical problem.

Ø  The IB (Investment Bankers ) are not the well wishers for investors rather they are the marketing agent for the company whose IPO is coming .The IBs get commission on listing profit in most of the time .We should not believe their analysis at all.

Ø   Very few IPO comes with good intention to benefit its investors (e.g. Infosys).But it is very difficult to know which one is that??? Because very less information available about those companies to small and retail investors like us…

Ø   Behavioral science tells , as an human when we are getting something new we get excited and jump on it such as new wife J , new fashioned dress !!, new ideas (not thinking if this is liable) and new stock (IPO) …..etc… The human nature to incline towards new is being exploited by IPO fund managers, investment bankers and by company itself !!!!People end of paying a high price for the IPO. Later they feel cheated when price starts crashing. At the end it makes investor poorer!!!

Ø    If you guys remember the case of Reliance Power IPO which was listed in 2008 with a price band of Rs430 – Rs 450/-.Later what happened you guys know. Currently it is struggling between  Rs 70-100/-

          Similarly you can take the example of DLF. And there are a lot….

Ø   Generally investors react on the first and fast information that availed on media which has been planted and planned by Investment Bankers and other paid organizations J

Recently I heard about Some Ali Baba which was oversubscribed ….. May god bless those investors…. Wish this Ali Baba would not become Challis Chor (Forty thieves) JJJ

You can Google out to know how people lost their money in Face Book IPO!!!!           

If you have 2Crore with you to invest in an IPO then easily become Crore Pati after losing 1 Crore J

So Guys what is your next hot IPO to invest?????

Disclaimer :

It is entirely my thought and not a stock buy or sell recommendation. The name of the companies are mentioned just for educational purpose.Please do your homework before investing in these companies.