IPO Gets Cold Shoulder

EghtesadOnline: With the share market languishing in the red amid the non-stop capital outflow by retail investors, new listed companies issuing IPOs no longer see welcome signs from investors.

News ID: ۷۸۷۷۲۳

13 February 2022

Investor turnout during the latest IPO on Wednesday was almost a fifth of the robust participation during the heydays of stock market less than two years ago.

The IPO was held for Pouya Zarkan Aghdareh, a mineral extraction company, with 10% stake on offer with 300 million shares, according to notice seen on the website of Iran Fara Bourse, the junior equity exchange.

According to Tasnim News Agency, less than 1.3 million trading codes partook in the IPO. Compared with trading codes in the past and record IPO turnout, the figure, at best, was abysmal indicating deep investor aversion.

A look at previous IPO data show that investor turnout in IPOs reached its apex in Sept. 2020 when 5.5 million came to buy shares of Gostar Pars Energy Company. After that investor participation fell to 4.2 million for Sepidar System Company, a software company.

The downward spiral continued plunging to 3.7 million when Tabas Parvardeh Coal Company went public. For the IPO of a poultry company in July 2.8 million trading codes participated.

Observers apparently see the low turnout as a threat to the inflow of liquidity into the struggling market and a natural response by the millions of retail investors to the a prolonged bear market.

IPOs offered high returns amid the frenzy of buyers competing for profits in major listed companies. But when market indicators began to plummet in August 2020, share prices of most newly listed companies plunged below the IPO prices only to undermine the trust of millions of small investors.

After making historic 300% gains in less than five months in the middle of 2020, the main index of Tehran Stock Exchange, TEDPIX, went into a deep correction territory that has continued so far.

It has shed 900,000 points since then and lost more the 42% of its value. Retail investors saw bigger losses in their portfolios.

Capital has incessantly fled the share market in recent months as investors increasingly lose faith in a comeback anytime soon. Liquidity that exited the market in the past six months is estimated at 360 trillion rials ($1.3 billion).