The ongoing surge in IPO activity has sparked renewed interest among individual investors, but Zerodha’s founder and CEO, Nithin Kamath, has raised concerns about a growing trend of risky behavior. Kamath highlighted a troubling increase in the pursuit of unlisted “pre-IPO” shares without a full grasp of the associated risks.
Describing the situation as a case of people engaging in speculative bets, Kamath observed a surge in the unlisted market where shares of companies are trading at significant premiums before their public offering. He cautioned against blind speculation on these “pre-IPO” companies, noting that some investors are hoping for greater returns than what the actual IPO might yield.
Kamath emphasized that many of these pre-IPO shares are commanding exorbitant mark-ups. He pointed out that such shares are often sold with mark-ups ranging from 100% to 500%, coupled with high commissions and unfavorable pricing. The real danger, he warned, is the potential for investors to incur losses even before the IPO is launched.
Expressing surprise at the popularity of unlisted shares, Kamath remarked on the unexpected growth of this market segment. He highlighted the aggressive promotion of pre-IPO shares through platforms like WhatsApp, noting the intense marketing efforts underway.
As the IPO market anticipates more offerings in the near future, Kamath’s words of caution serve as a timely reminder for retail investors to exercise prudence amidst the hype. Experts frequently advise caution when dealing with unlisted shares, citing concerns over pricing discrepancies, liquidity challenges, and lack of transparency compared to the traditional market.