SEBI’s recent study highlights significant trends in investor behavior regarding Main Board IPOs listed between April 2021 and December 2023. The study found that 54% of IPO shares allocated to investors (excluding anchor investors) were sold within a week of listing. Individual investors exhibited a notable “flipping” behavior, with 50% of shares sold by value within a week and 70% within a year. The study also identified a strong disposition effect, with investors more likely to sell shares showing positive gains. Notably, 67.6% of shares were sold within a week when returns exceeded 20%, compared to 23.3% for negative returns. Additionally, the post-COVID period saw a surge in demat accounts, with nearly half of those used for IPO applications being opened during 2021-2023. SEBI’s policy changes in April 2022 led to a reduction in oversubscription of Non-Institutional Investor (NII) shares and a decline in large-scale NII applications. For more details, the full study is available on the SEBI website.
Securities and Exchange Board of India
PR No.19/2024
SEBI study shows 54% of IPO Shares allotted to Investors (excluding anchor investors) are sold within a week
In light of the increasing participation of retail investors and the heightened oversubscription in recent IPOs, SEBI conducted an in-depth study to analyze investor behavior in Main Board IPOs. The study encompasses data from 144 IPOs listed between April 2021 and December 2023.
Key findings of the study include:
1. “Flipping” behavior among Individual Investors: Individual investors sold 50% of the shares allotted to them by value within a week of listing, and 70% of shares by value within a year.
2. Disposition effect evident among Investors: The study found 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.
3. Returns influencing the selling behavior: When IPO returns exceeded 20%, individual investors sold 67.6% of the shares by value within a week. In contrast, only 23.3% of shares by value were sold when returns were negative.
4. Surge in Demat accounts post-COVID: Nearly half of the demat accounts that applied for IPOs between April 2021 and December 2023 were opened during the post-COVID period (i.e., 2021-2023).
5. Following SEBI’s policy interventions regarding Non-Institutional Investor (NII) share allotment process and RBI’s guidelines on IPO financing by NBFCs in April 2022, the following trends were observed:
- Significant reduction in NII category oversubscription: Oversubscription under the NII category halved from 38 times to 17 times.
- Sharp decline in applications from “Big Ticket NII Investors”: The average number of applications from NII investors applying for more than ₹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 is available on the SEBI website at www.sebi.gov.in
Mumbai
September 02, 2024
