54% of IPO shares allotted to investors sold within a week: Sebi study

A recent study conducted by capital markets regulator Sebi revealed that around 54 per cent of IPO (initial public offering) shares allotted to investors, excluding anchor investors, have been sold within a week. Anchor investors have to comply with a mandatory minimum lock-in period after IPO shares are allotted.

"About 54 per cent of IPO shares (in value terms) allotted to investors (excluding anchor investors) were sold within a week from listing. Individual investors sold 50.2 per cent shares (in value terms) allotted to them within a week from listing. Non Institutional Investors (NIIs) sold 63.3 per cent shares by value. Retail investors sold 42.7 per cent shares by value," the study, released on Monday, stated.

Individual investors sold 70 per cent of IPO shares by value within a year, it also mentioned.

Key findings of the study included 'Flipping' behavior among individual investors, disposition effect evident among investors, returns influencing the selling behavior and surge in demat accounts post-Covid.

The study founded a strong disposition effect, with investors showing a greater propensity to sell IPO shares that posted positive listing gains, compared to those that listed at a loss.

"When IPO returns exceeded 20 per cent, individual investors sold 67.6 per cent of the shares by value within a week. In contrast, only 23.3 per cent of shares by value were sold when returns were negative," it said.

Following Sebi's policy interventions regarding non-institutional investor (NII) share allotment process and RBI's guidelines on IPO financing by NBFCs (non-banking financial companies) in April 2022, two trends were observed.

First, a significant reduction in NII category oversubscription which halved from 38 times to 17 times. Second, a sharp decline in applications from 'Big Ticket NII Investors'.

"The average number of applications from NII investors applying for more than Rs 1 crore in IPOs dropped from approximately 626 per IPO in the pre-policy period (April 2021 - March 2022) to around 20 per IPO in the post-policy period (April 2022 - December 2023). Note that the total funds raised during the two periods were comparable," the study underscored.