Read on the application
Many big companies have entered the stock market through IPO in the year 2023. At the same time, many companies are lining up to bring IPO next year as well. In such an environment, while investors are making money from IPOs, they are also suffering losses. There are a few things to keep in mind to avoid losses in an IPO. This will also facilitate your IPO allocation.
Do not blindly trust GMP
Many people just check the gray market premium i.e. GMP and then invest money in the IPO thinking that if the company is getting good response in the gray market, then money will be made. Remember that the gray market premium can be a way to predict a company’s listing but it does not guarantee that the listing will be good or bad. Always rely on your personal research.
Take a look at RHP
Just like before investing in a company you need to have complete information about it, similarly before betting on any company’s IPO you must have complete information about the company. It is important to know whether the company is making profit or not, what is its record in the last few years, how many states or countries it is operating in, etc. All this can be known by looking at the Red Herring Prospectus i.e. RHP.
What is the purpose of bringing an IPO?
It is also important for investors to know why the company is launching its IPO. Is it possible that the promoters themselves brought about the IPO by creating an environment where the company was in losses after making profits? So that they can profit themselves and dump shares on you.
Keep in mind the cut off price
While applying for an IPO, many new investors make the mistake of not choosing a cut-off price. They feel that this will enable them to buy more shares for less money. But doing so reduces your chances of getting an IPO. So always tick the cut off price option while applying for IPO.
Don’t make this mistake with PAN
Many investors who have more than one demat account apply from all the accounts thinking that this might increase their chances of getting an IPO. But keep in mind that this may lead to rejection of your application. Demat accounts should be linked to different PAN cards. To increase your chances of getting an IPO, you can apply from the demat accounts of your family members who have PAN cards.
Never apply with a loan
Many people take loans thinking that they will make a profit by investing money in the IPO and then keep the profit for themselves and return the money borrowed from the bank or their friend. Here is the error share market Doesn’t always go as predicted. If the listing goes down, the investor’s money is stuck or he has to withdraw the money at a loss.