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Lacklustre listing, discounted price: how a retreating bull market can impact an IPO’s quality


Concept by Sidhartha Shukla and Muhabit ul haq

Synopsis

The quality of the IPO market has been extremely poor over the past few months. Weak businesses and even those with no track record of profitability got listed on the back of a buoyant equity market. Will this euphoria continue? ET Prime analysed the listing day and current market price data of some stocks and found a trend.

The level of IPO activity is strongly procyclical. This means valuations at the time of listing are typically elevated, effectively causing dilution of earnings per share at the aggregate level. – Excerpt from Capital Returns, edited by Edward Chancellor We all know there is a strong relationship between quality of IPOs (initial public offers) and the bull run. While most IPOs hit the market when it is up by more than 15% over the previous

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