Pursuing quick gains from IPO fraught with danger, experts warn investors
Investors have been warned to avoid speculating on initial public offering (IPO) shares as some listed companies take advantage of the market situation by setting the share price higher than its base price, experts said.
Anurak Boonsawaeng, a large investor who specialises in value investing, said many IPO shares were launched recently, and some of those attracted investors with good returns, tempting companies that were in the preparatory stages to list on the market to cash in on the positive sentiment.
"I believe that this factor led to high IPO share price because many companies took advantage by setting the price higher than its base price and the IPO share price rose by 200 per cent, hoping that investors would buy their shares on the first day of trading," he said.
"Personally, I would like to warn investors to avoid investment in IPO shares if they are hoping that the share price will rise by 200 per cent on the first day of trading because the price of IPO shares will drop after rising for a while."
He explained that the reason for the 200 per cent appreciation of an IPO share price on the first day of trading may be due to lower free float.
"I do not recommend investors buy IPO shares if they are hoping that share owners will boost the price, because they will not allow investors to take profit easily," he said.
"Therefore, investors who have not subscribed should avoid investing in IPO shares, unless it has good fundamentals because the price will eventually reflect the company's fundamentals."
He said he has over 50 shares in his investment portfolio.
"I advise investors to gradually buy shares that have good fundamentals because, sometimes, the price of some IPO shares may remain in negative territory for the long term," he said.
He added that the time when the Stock Exchange of Thailand (SET) Index falls sharply is a good opportunity to buy shares that have good fundamentals.
Meanwhile, Watchara Kaewsawang, another large investor, said investors should be careful while selecting IPO shares.
"Initially, investors should check the company's fundamentals, such as business direction, profit, free float, especially its price whether the subscription price is higher than its base price or not," he said.
He added that whether the price of IPO shares would rise sharply or not, would depend on market conditions as well.
"In the past two months, the price of IPO shares was higher than the subscription price because the stock market performed well," he added.
