What am I missing out on if I don't invest in an IPO?
Missing an IPO shouldn’t be seen as a missed opportunity
Dubai: IPOs often attract high investor interest, but not all investors get allotted shares. Those who miss out may consider buying shares later, though experts suggest waiting before taking the plunge. But why?
IPO stocks often have no price-volume history, making it hard to determine their actual value. Oversubscribed IPOs typically debut at high prices, reducing potential gains for secondary market buyers. Extreme valuations may indicate unfavorable risk-reward ratios.
IPOs are volatile initially
IPO stocks are volatile in the initial months. Investors who buy during the IPO often face 90-180 days of restricting sales, whereas open-market buyers can trade freely. It's wise to wait and observe price movements post-listing to make informed decisions.
After listing, stock prices fluctuate as demand shifts. The company benefits from high IPO pricing but earns no additional revenue from secondary market sales. Overpaying for shares during the listing may harm long-term returns.
Final thoughts? Experts recommend viewing IPO shares as long-term investments, especially for oversubscribed or strong companies. Short-term buying post-listing often leads to inflated costs and reduced profits.
Avoid chasing IPO stocks immediately after listing. Instead, wait for prices to stabilise and assess the company’s true value. If investing in IPO shares, focus on long-term growth rather than quick profits.