Exit Strategy for IPO-Allotted Shares: A Personal Thesis
Over recent years, I have discerned a distinct pattern that underpins my approach to exiting IPO-allotted shares. This thesis, grounded in empirical observation, offers a potentially valuable exit strategy for discerning investors
Do Exit After a Significant Listing Gain (100%+)
When an IPO debuts at a premium of 100-120% or more, I advocate for an expedient exit, preferably on the subsequent trading session following the listing day. While many investors succumb to the allure of further gains, anticipating new highs, I contend that this juncture represents the optimal moment to realize profits. Although one might forgo an additional 10-15% upside, the strategic advantage lies in liberating capital for reallocation into the secondary market or other IPOs presently available for subscription.
Historically, stocks that debut with such significant gains tend to face consistent weekly declines, often taking years to return to their listing-day levels.
Recent Examples:
BLSeService
Tata Technologies
Strategic Buying on Undervalued Listings
Conversely, a stock with robust fundamentals that lists significantly below its Grey Market Premium (GMP) due to external factors represents a strong buying opportunity, whether for short-term or long-term investment. In a bullish market environment, it is advisable to purchase a substantial position on the listing day and to add more shares on every subsequent 5% dip. However, this strategy requires a solid understanding of the stock's fundamentals and a strong conviction in its underlying value.
Examples of Undervalued Listings where I made money🙏
Protean eGov Technologies
IREDA
Platinum Industries
Aadhar Housing Finance
Bharti Hexacom
While no thesis guarantees absolute certainty, this approach has consistently guided my decisions regarding whether to hold or exit IPO-allotted shares. My investment philosophy hinges on the principle of either holding a substantial quantity or not holding at all. Of course, there are always exceptions to any rule.
I trust that this perspective will be of benefit to fellow CG members. 🙏
सर्वे भवन्तु सुखिनः, सर्वे सन्तु निरामयाः