Overvaluation in IPOs is surely a concern, says Jitesh Agarwal of Treelife
MintGenie, Agarwal said that investors must regularly review their mutual fund holdings. Many investors end up subscribing to IPOs based on the brand value however it is necessary to evaluate the following factors before investing in a company: Overvaluation in IPOs is surely a concern as it can lead to unrealistic expectations and subsequent market corrections which could erode investor wealth, especially retail investors. Investors should be cautious and conduct thorough research to understand the true value of the company against its market price.
Take, for example, Paytm/Nykaa where both companies experienced significant share price declines post-IPO, raising concerns about overvaluation. Investors generally overlook governance and transparency because of the temptation to earn quick profits, market hype, or insufficient information. It’s important for investors to prioritize these factors to ensure long-term sustainability and mitigate any foreseeable risk.
Investors especially retail should regularly review their mutual fund holdings and assess whether the fund’s investment strategy aligns with their risk appetite and investment goals. If a fund consistently invests in overvalued businesses, investors should reconsider their current investments and explore more prudent options. Companies should focus on establishing strong governance, financial transparency, a clear business strategy for the future, and effective communication with potential investors about the current business.
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