IPO Investors Need to Broaden Their Horizon Beyond Listing Gains

For retail investors, the appeal of IPOs is increasing given the appeal of strong listing gains, as reported for some of the recent issuances. However, caution is required, especially during times of high market volatility. The key question is how many companies can retain their trading gains and grow them over time. According to an ETIG analysis of the top companies that went public since the beginning of 2020, almost half of the companies that posted listing gains of 50% or more failed to keep up.

There were 48 companies in the sample that achieved listing gains of 50% or more. Of this, the returns of 23 companies as on September 30, 2024 were below their respective listing earnings. This means that almost half of them were unable to retain their trading gains. The return period varies from company to company and depends on the listing date. September 30 was taken as the deadline to avoid the effect of higher market volatility on stock returns in the first week of October. Benchmark indices have lost more than 3% in the first four days of October.

The analysis also shows that all is not lost for companies that fail to generate listing profits. In the sample, 36 out of 53 companies or two out of three companies that failed to achieve listing gains were able to generate returns as of September 30, 2024. For example, among the recent IPOs listed below or listed offering price , Housing Financing on AadharDurable EPACK, Electric Mobility Waveand Zaggle Prepaid Shipping Services gained in subsequent operations.

So far in 2024, companies like Vibhor Steel Pipes, BLS Electronic Services, Premier Energies, Home Financing in Bajajand Unicomercio electronic solutions have recorded triple-digit stock gains. IPOs serve as an effective channel for investors to seek exposure to lesser-known companies or companies that have been privately held. Of the 250 companies in the sample that have gone public since January 2020, 135 or 54% have achieved returns of 50% or more and 84 or 33% have achieved triple-digit returns.