When will MindTree and Idea get 'listed'

[rambharosey]

Hello all!! My first mail to this wonderful forum. I have invested heavily (by my standards that is..) in MindTree and Idea. I actually plan to exit on the first day itself (since I am hoping these IPOs will end their first day at the stock exchanges at a premium).

How do I know at what date these IPOs will actually start trading? Seems like this information should have been readily available, but can't find this in their prospectus...Hmm..

Bharosey.

 

[riser3]

i read somewhere that IPO's start trading after 21 days after the closing date of issue

 

[rkthomas]

the listing date will be decided by the co under the guidance of exchanges and sebi for knowing the listing date pls watch cnbc or ndtv especially cnbc's u r stocks, or try to check exchange websites regularly ,most probably these issues will be listed in the first week of march

 

[RSI]

I have invested heavily (by my standards that is..) in MindTree and Idea. I actually plan to exit on the first day itself (since I am hoping these IPOs will end their first day at the stock exchanges at a premium).

Bharosey.

I honestly do not think it as a right strategy. Please learn the nitty gritty of trading. There is a lot of educative and informative posts in this forum. Go through them slowly and carefully. You have come to the right place for learning. Please note the following:-

1. Do not place all eggs in one basket. Do not invest all your money in one or two scrips.

2. Hope is the worst thing in trading. Learn how to cut losses (they are inevitable) and how to let your profits to run.
There is lot more to learn.
Regards
R. S. Iyer

 

[rambharosey]

Thanks Iyer. Actually its not too much of a shot in the dark. I have read pages and pages of theory as to why the underwriters (and other stakeholders too) have an incentive to underprice the issue (primary reason being that underwriters are penalised if they cannot sell the entire issue; and if the investors think the issue is overpriced, they will not buy). Even statistically, more than 95% of issues have sold at a premium at the end of first trading day).

Would be interested in your comments though, since (as you rightly said) my actual experience is non-existent. Just that I have read a lot about it.

 

[RSI]

Do not have an impression (even by mistake) that I am an expert in trading or stock investing. I am also trying to learn just like you.

Please note the following points:-

1. Shares are being issued to the public by the promoters. Promoters are the persons who have created and developed the company. Public issue is their opportunity to make money and to get paid for all their hard work put during all these years (note: I said years not days). It is quite human to extract as much as possible for one's hard work.

2. Underwriters are intermediaries, i.e. connecting link in the sale of shares from promoters to the public. They will work for a few days only (when compared to the promoters) and naturally they will have to contend with far less than what the promoters get. Being intermediaries, the promoters will have options in choosing one among the many underwriters. This invariably means, underwriters will have to compete among themselves. This naturally gives an edge for the promoter to issue share at a higher price.

3. Remember. This is a run away bull market. In these sort of markets, me too companies will issue shares to the public and almost all issues will be subscribed fully and many times oversubscribed heavily. That means, the risk to the underwriter is insignificant in these sorts of bull market. These conditions will compel the underwriter to agree with the promoter on pricing of the public issue, eventhough it is on the higher side.

4. Even if one issue devolves on the underwriter, the money made by him in other issues will compensate much more. What I am trying to say is, underwriter will analyse risk reward ratio not only in the particular issue, but also the money made in other issues. That will prompt him to take higher risks. i.e. agree for higher pricing of new shares issued to the public. Underwriter will try to garner as much issues as possible.

I Hope I have put down my thoughts in a correct and legible manner. These are only my thoughts. If I am wrong, anyone can correct me.
Regards
R. S. Iyer

 

[rambharosey]

I think there are few points that might have been wrongly stated in your mail. The profit for the promoters is never the stated (only implied) reason for IPO. Promoters are (at least supposed to be) there to stay with the company. This is in contrast to PE players (like VCs) who really have IPOs as exit strategy.

As for underwriters (i-banks), they have a huge responsibility (much more than what your mail seems to be giving them credit for). Firstly they have the sole responsibility of bookbuilding process (which gives them a rough idea of what the issue price will be). A bull run is just one of the factors which decides whether or not the entire issue would be sold. Remember that normally 60-70% of the issue (or even more) is reseverd for institutional investors, and these investors don't just look at the bull (or bear) run. They do a 'fundamental' valuation of the company (by Discounted cash flow method, residual operting income, comparable ratios such as P/E etc.) to find whether the issue is worth investing in.

There *have* been issues in the past which were not fully subscribed (despite the bookbuilding process!!) since investors opined that the issue was overpriced. And while it is true that the promoters select the underwriters, one of the *big* things that all promoters look for in an i-bank is whether the i-bank has been able to carry (100% subscription) all the IPOs in the past. Just think about the kind of damage it could cause the company (in terms of reputation) if its issue was undersubscribed. Hence, there are quite stringent penalty clauses attached for the i-banks, if the issue does not get fully subscribed.

And to ensure 100% susbcription, i-banks under-price the issue so that the investors consider it an attractive buy.

In fact, even after the trading starts, the underwriter 'supports' the price (and hence the term support price) for few days. Of course, the underwriters, for all this risk that they take, they charge a hefty fees.

Just google on IPO underpricing and you will find lots of information. One of the articles is at:

http://www.ecb.int/pub/pdf/scpwps/ecbwp428.pdf

 

[tasin]

I think there are few points that might have been wrongly stated in your mail. The profit for the promoters is never the stated (only implied) reason for IPO.

Can u elaborate a li'l more on this.. I understand that before IPO promoters hold 100% of the ownership and post IPO they want to have just controlling stake. But for the stake they have sold through IPO wouldn't they like to get maximum gains outta it (by pricing IPO the max they can). Now what they are going to do with that money is altogether different matter (or is it still related with the cause ???)
Plz clear my doubt,...

 

[rambharosey]

It is definitely not true that before IPO, promoters hold 100% of the company. A case in point is VC funding when VCs hold a huge part. Even otherwise, anyone and everyone who has invested in the company (before IPO) can hold a stake, not just the promoters.

 

[harmads]

Can u elaborate a li'l more on this.. I understand that before IPO promoters hold 100% of the ownership and post IPO they want to have just controlling stake. But for the stake they have sold through IPO wouldn't they like to get maximum gains outta it (by pricing IPO the max they can). Now what they are going to do with that money is altogether different matter (or is it still related with the cause ???)
Plz clear my doubt,...

tasin
Before an IPO is approved by the regulating authority, they have to specify where the money will be spent. And the authority keeps a close eye on where the money is spent. An investor is much safer now than in Harshd Mehta's time.
Regrds