(8) Business Expansion Using IPO Cash
It is one of the most critical secrets to find blockbuster IPO for listing gains. IPO issues are usually designed to raise funds for the company. But, what is the company’s plan to do with IPO cash?
The red herring prospectus must state reasons for selling shares through an IPO. Its best if the company is using IPO cash for the purpose of business expansion.
However, if the money is only for paying large investors for their stake or for reducing huge debts then it is better to stay away.
A well-planned business strategy with innovative products & services along with enough cash can take a company to new heights. Thus, short-term traders can subscribe IPO issue of such great company.
(9) Higher IPO Grading
It is one of the most popular secrets to find blockbuster IPO for listing gains. IPO grading is the grade assigned by credit rating agency registered with SEBI (in India) or SEC (in US).
Such grading is generally assigned on a five-point scale. A higher score indicates stronger fundamentals of a company. IPO grading provides investors an independent assessment of the fundamentals of new public offerings.
According to a study conducted by rating agency Crisil, companies with higher IPO grades command superior valuation.
These companies also weathered the business cycles better even during global financial turmoil. It is perhaps due to robust business fundamentals, superior management strength and good governance practices. Thus, short-term traders can subscribe IPO issue for quick gains.
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