So where does this leave the investors? As M. Damodaran, Chairman SEBI, rightly claims, globally, no known model for grading an IPO exists. This is clearly highly
creditable. But a retail investor must not forget that the IPO grading service is not an investment recommendation, but an aid in the decision-making process. Any IPO’s grading will surely help the investor in a volatile market and will arrest the trend of bogus companies coming up with IPOs (the vanishing companies of early nineties are a point in case). But one wonders how well would the rating agencies be able to assess market risks of projects that are starting anew, given the fact that forecasts of new business returns and profits are as volatile as the jazzed up biodata of the promoters that one sees in various prospectuses of corporations? Worse, what if a business, whose IPO had been graded as being amongst the best, tanks horribly? Would SEBI move towards action against the grading agencies for incorrectly calculating the IPO’s worth? Would SEBI be open to litigation against their own name? Well, many investment banking firms have had to pay millions of dollars in the West for having given wrong investment advice to their clients. One just hopes that IPO grading does not turn out to be the latest part of Nightmare on Elm Street for our dear regulator.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2006
An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
Read more:-
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· IIPM News
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creditable. But a retail investor must not forget that the IPO grading service is not an investment recommendation, but an aid in the decision-making process. Any IPO’s grading will surely help the investor in a volatile market and will arrest the trend of bogus companies coming up with IPOs (the vanishing companies of early nineties are a point in case). But one wonders how well would the rating agencies be able to assess market risks of projects that are starting anew, given the fact that forecasts of new business returns and profits are as volatile as the jazzed up biodata of the promoters that one sees in various prospectuses of corporations? Worse, what if a business, whose IPO had been graded as being amongst the best, tanks horribly? Would SEBI move towards action against the grading agencies for incorrectly calculating the IPO’s worth? Would SEBI be open to litigation against their own name? Well, many investment banking firms have had to pay millions of dollars in the West for having given wrong investment advice to their clients. One just hopes that IPO grading does not turn out to be the latest part of Nightmare on Elm Street for our dear regulator.For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2006
An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
Read more:-
· My Blog
· IIPM News
· IIPM : IIPM Links
· IIPM: More about IIPM
· IIPM Alliances - IIPM - by RAVI
· IIPM PUBLICATION
