Don't confuse listing gains with wealth creation & chase every shiny IPO

Indogulf Biosciences IPO

I’ve spent more than a decade watching markets go through euphoria, despair, hope, and delusion. If there’s one recurring spectacle that never fails to fascinate me, is the frenzy of initial public offerings (IPOs). They aren’t just financial events; they are theatre, carefully scripted by investment bankers and founders seeking exits, not necessarily believers seeking partners.

Behind the champagne-popping and ticker tape, lies a brutal calculus — of valuation games, fleeting narratives, and retail dreams often sold at a premium. The question is not how loud the opening bell rings — but who’s left holding the scrip when the curtain falls.

In recent years, IPOs have morphed into something quite different from what most retail investors imagine. Between 2021 and 2024 alone, 250 mainboard IPOs debuted on Indian bourses — a wave of new listings that sparked immense excitement. The headlines were glowing, the demand seemingly insatiable.

But strip away the hype, and the numbers tell a sobering story: 48 percent of these IPOs now trade below their listing price. More revealing still — 73 percent have under-performed the Nifty Smallcap 250 index, and nearly two-thirds (64 percent) have even lagged behind the BSE IPO index, a benchmark supposedly designed to highlight the very segment they belong to.

When I meet retail investors, I often hear:

I understand the excitement. Storytelling is powerful — it sells visions, fuels hope, and drives demand. But the market is a ruthless judge. It doesn’t reward narratives; it rewards numbers. It rewards execution. And it punishes dreams that are priced too high.

Many IPOs today are no longer wealth-creation events — they’ve become wealth-exit events. The primary beneficiaries? Promoters, early private equity investors, and insiders.

What was once a bridge to raise capital for genuine business expansion has morphed into a high-stakes game of musical chairs, where the retail investor often shows up just as the music is about to stop.

There’s an old saying in market circles:

Before the IPO, promoters have vision and investors have money. After the IPO, investors have vision and promoters have money.

The process is subtle, but remarkably efficient:

• Promoters offload significant stake.

• PE funds quietly book outsized profits.

• Anchor investors secure preferential allocations and exit within months.

• The public — wooed by glossy roadshows, flashy ads, and influencer “analysis” — piles in at the peak of optimism.

• And then, the stock quietly loses steam.

Just look at the IPO fundraising trend from 2007 till 2025 — the chart speaks volumes.

You’ll notice IPO peaks during bullish phases when liquidity is abundant and optimism sky-high. These moments aren’t coincidences — they’re meticulously timed.

Smart sellers don’t exit in panic. They exit into euphoria.

Now, let’s not paint all IPOs with the same brush. There are businesses that list at reasonable valuations, with solid fundamentals, visionary leadership, and long runways for growth.

But these are rare gems, not the norm.

The problem isn’t with IPOs. The problem is how retail investors approach them — often blinded by hype and driven by FOMO.

Markets are brutal teachers. And one lesson they’ve repeatedly offered me is this:

Wealth is rarely created in the initial buzz. It is created in the patient years that follow.

So here’s my humble advice, drawn from years of watching bull and bear cycles unfold:

• Don’t confuse listing gains with wealth creation.

• Study the business, not just the subscription numbers.

• Valuation matters — always.

• Resist the temptation to chase every shiny new listing.

• Let the business prove itself post-listing. The market almost always gives you a second chance.

As I write this, 2025 is shaping up to be another bumper IPO year. New listings are queuing up, armed with grand visions and glossy pitch decks.

But remember:

Where dreams list, wealth often doesn’t.

The dream isn’t in getting an IPO allotment.

The real dream is in holding great businesses long after the cameras stop flashing.

Invest wisely.