When ‘good’ IPOs go bad – why listings stumble and how to evaluate them
Many recent IPOs face a structural disadvantage because they are relatively small companies
Many Singaporean initial public offerings (IPOs) this year have underperformed expectations, with five out of nine major listings trading below their offer prices as of Aug 7. The trend is not unique to this year, as six out of 12 IPOs last year still traded below their offer prices at the same time. Factors contributing to the poor performance include small company size, low trading volumes, and lack of institutional backing, making these stocks vulnerable to price drops once initial retail interest fades.
Additionally, IPO structures and valuation play a crucial role in determining early performance. Companies with below 90% occupancy rates, like UI Boustead Reit, may struggle to attract institutional investors and face post-listing weakness. Retail investors should carefully evaluate valuation before subscribing to an IPO, looking for valuations that leave upside potential.
Investors should also consider management credibility, growth prospects, and the intended use of IPO proceeds rather than relying solely on early share-price movements. For loss-making companies, investors should assess cash flow and capital sufficiency to avoid repeated fundraising. To mitigate the impact of poorly performing IPOs, investors should size their positions carefully and keep such investments separate from their core portfolio.
Despite the challenges, Haran remains optimistic, believing that if companies meet their business objectives, their share prices will eventually reflect their success.
Written by urgent.news from The Business Times - Companies & Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
