IPOs: Shiny Temptation or Solid Investment?

Let’s be honest: we’ve all been tempted by the buzz around IPOs. Every now and then, you’ll see social media explode with chatter about the next “big thing.” It’s easy to get swept up by the excitement, but I’ve learned (sometimes the hard way) that we should pause and ask a few key questions before hitting that “subscribe” button.

1. Why Are You Subscribing?

I once knew someone who signed up for the Mamaearth IPO simply because she adored the brand’s products. While it’s great to be a fan, let’s face it—loving a shampoo or a face cream doesn’t always translate into business success. I’ve been guilty of that same thinking myself: “I use it, so it must be an amazing company!” But as investors, we’re looking for more than just a trendy product. We need stability, growth, and an edge over the competition.

So, ask yourself honestly: Are you buying shares because you truly see long-term value, or is it just FOMO (Fear of Missing Out)? Remember, “everyone’s doing it” is rarely a solid investment strategy.

2. What’s Your Actual Investment Thesis?

Here’s a reality check: You need a game plan. Think about the company’s fundamentals—how does it make money? How quickly is that revenue growing? Does the company stand out among rivals, or is it just another face in the crowd?

Try to figure out if the IPO price seems reasonable. Companies often go public when the market is on an upswing because they can command higher prices. That’s smart for them—but not always so great for us if we’re overpaying.

And let’s not forget motives: why is the company raising money? Is it to expand its business, pay off debt, or are the original investors simply cashing out? It’s important to know, because that can reveal how confident the founders and early investors are about the company’s future.

3. Are You Buying Just to Flip It?

Here’s where it gets tricky. We’ve all heard those stories about people making a quick profit on listing day. But it’s a gamble. In fact, a study by SEBI shows that most “non-institutional” and retail investors sell their shares within the first week of listing. After a month, a significant majority have already jumped ship.

If your plan is to buy an IPO today and sell tomorrow for a quick gain, you’re basically rolling the dice. Yes, some get lucky, but you can also end up holding the bag if the stock goes downhill. Just ask anyone who bought into an overhyped IPO that never really took off.

Learn from Past Manias

This isn’t the first time the market has gone a little wild. Remember the dotcom craze in the late ‘90s? Or the real estate and infrastructure mania around 2007-2008? Those were times when investors believed everything with a “.com” or “infra” in its name would skyrocket—and many crashed soon after. History has a way of repeating itself if we’re not careful.

So, What Should You Do?

If you’re genuinely in it for the long haul, you don’t have to jump on every IPO as soon as it hits the market. Let it settle. Let the hype die down. Take a closer look at the numbers. If the company is truly solid, there will be an opportunity to invest later—often at a more reasonable price.

In fact, some of the biggest winners in history were companies you could’ve bought well after they went public, once they proved themselves in the market. Patience can pay off. And if you do decide to invest at the IPO stage, do it because you believe in the business fundamentals, not because everyone else on social media says it’s a sure bet.

Final Thoughts

IPOs can be exciting—who doesn’t love the idea of getting in early on the “next big thing”? But excitement alone isn’t a strategy. Before you commit your hard-earned money, pause and ask yourself:

• Is this company truly special, or am I just caught up in the moment?
• Do I understand how it plans to grow and make profits?
• Am I prepared to hold on if the stock price moves against me?

Investing should be about finding good businesses at fair prices and holding them for the long term. Hype comes and goes, but real value stands the test of time. Keep that in mind the next time you see the words “hot new IPO.” You might just thank yourself later.