The Complete IPO Guide for Indian Investors · Chapter 14 of 15
Common IPO Mistakes to Avoid
Chasing the GMP
Applying only because the GMP is high ignores the fact that the grey market can reverse overnight and that the quote may not be accurate.
Ignoring the business
Many applicants never open the prospectus. A short read of objects of the issue, promoter selling and debt can help avoid a poor choice.
Over-concentration and leverage
Putting too much of your savings into one application, or borrowing heavily to apply in a larger category, magnifies the loss if the listing is weak.
No exit plan
Without a plan you will decide under pressure. Write down, before the issue opens, why you applied and when you would sell.
Missing the small print
Missed UPI mandates, mismatched names and late applications cost more allotments than bad luck does.
Confusing a good company with a good price
A strong business can be a poor IPO at a very high valuation, and a modest business can be a decent one at a fair price. Judge both the company and the price.
Key takeaways
- A high GMP is not a plan.
- Read the objects of the issue and promoter selling.
- Never borrow beyond what you can afford to lose.
- Separate the quality of the business from the price.