When we speak of private markets and public markets, it should be made clear that these are two totally distinctive entities. Public markets are exactly what they are called - ‘public’. Each day, the markets open at a certain hour and close at a prescribed time, and in between, inventors and traders who have access to accounts with a brokerage are free to purchase or sell shares/stocks of any company listed on an exchange. Private markets have a different modus operandi. The shares and stocks of private companies are not listed for any member of the public to buy and sell. These are companies whose investors are exclusive and largely composed of the founders of the company, certain banks and high-net worth individuals. However, a private company may decide to go public and appear on any upcoming IPO list.
From the point of view of the value of any company, putting private companies and public companies into the right context while investing counts for something. Private companies are valued in terms of potentially “what they could become”, whereas public companies have already displayed significant enough growth, and hence, have been listed on regular exchanges for the general public to purchase and sell their stocks/shares. Therefore, in any upcoming IPO list, you will see private companies that have reached a significant state in their own growth and development and wish to offer their shares to the public and become listed companies. This is when they become part of any upcoming IPO, or Initial Public Offering, open to subscription of their shares to the public at large. Additionally, when a privately operated and held company is valued at a large sum, it tends to want to expand and this is largely possible due to offering its shares for sale to the public. This brings in more money for the company’s growth, and provides a promising investment opportunity for investors.
The Indian IPO boom of 2021 is likely to be remembered by one and all for a long time to come. The markets blossomed, IPOs thrived, and the general sentiment was one of sheer optimism and hope. There was abundant liquidity and increased participation in the retail world, and with a fall in interest rates globally, this set the mood to invest in the markets and of course, in legendary IPOs. Any new upcoming IPO was eagerly awaited and subscribed to and the rush to open new Demat accounts was mainly due to new IPOs launching. Since the year 2019, according to some reports, the amount of domestic IPOs have witnessed a surge of 113.3 per cent. So, 2021 saw an IPO frenzy of sorts. 2022 may seem a bit lacklustre in comparison.
Upon entering 2022, any IPO listing today may evade the most enthusiastic investor. 2022 may not be such an IPO-frenetic year, as the IPO hysteria has died down due to a number of circumstances, both international and domestic in nature. Here is why IPOs may not bloom in 2022 as they did in 2021:
Speculation - As we all know, the markets are driven by investor sentiment and analysis to a huge extent. After the buoyant year for IPOs in 2021, and some fiascos like those of Paytm and Nykaa, investors had predicted that 2022 would be somewhat muted in respect of IPOs.
Volatile Markets - The year 2022 has started badly for Ukraine, but it has also left scars on the global market outlook for 2022. While commodity energy stocks are reaching new heights, share prices seem unsteady on their feet. This makes for an unwelcome ecosystem for any IPO listing today.
Economic Growth - Economic growth, overall, has slowed due to the pandemic, and although things seem to open up, new waves of infection cause inconsistent shutdowns and a rise in inflation. Here, again, the financial environment is not aligned with IPO investment, so investors seem to be pulling back.
The Bar Raised - With the cooling of stock markets, investors will undoubtedly become more wary of the companies they choose to back. The performance of some potentially “hot” IPOs last year was sorely disappointing, and has left a bitter taste in investors’ mouths.
An IPO that most investors are looking forward to investing in is the upcoming LIC IPO. Even if you are not thinking of IPO investment right now, you can easily diversify your financial portfolio with other investments. Go ahead and open a Demat account first, and invest with the most experienced broker in India.