Author(s): Mohammed Arshad Khan, Khudsiya Zeeshan, Md Faiz Ahmad, Syed Azhar, Abdullah A. Alakkas, Md Rashid Farooqi
The government institutions and corporate companies raise finance through debt and/ or equity. The unlisted companies can issue shares through Initial Public Offering (IPO) from the primary market. It is an opportunity for these companies which are planning to expand, diversify, and grow with better future business prospects. For an investor holding shares issued through IPO can consider it as a mere speculative opportunity in short term or an opportunity to earn high dividends with capital appreciation in the long run. The study attempts to evaluate the value of share premium and pricing on listing day, assess progressive growth of IPO return. Further the study compares short-term performance with the long-term performance of IPO returns using Wilcoxon Signed Rank Test. The sample includes twenty-six companies issued IPOs that were successfully listed in the year 2016. The study considered a period of three years from the date of issue for analysis, i.e., 2016 to 2019. The study found that return on IPO fluctuated during the study period. Among the select sample, twenty IPOs have provided returns on the listing day. The IPOs traded on the stock exchange are found to be promising in long term when compared to short term period. It is also found that the companies that have overpriced issue price have failed to grow during the study period. This study acknowledges the fact that holding investment for a longer period provides an opportunity to earn higher returns. The study suggests the investors to hold investment for more than one year for better returns. Further the investors can sell the shares that are overpriced by the end of the listing day to minimize the losses.