Punters make a killing in IPO listings

While several investors may have had their hearts in their mouths as the HT Media stock retreated from the day's high of Rs 735 to close just 5 per cent above the issue price (closed at Rs 557), many others would have had enough reason to smile at the end of the day.

In all likelihood, there were more sellers than buyers at the HT counter making enough room for investors to make money even as the stock closed lower.

Interestingly, the total traded volume on the top two exchanges amounted to 199 lakh shares even as the company had offered only 76.9 lakh shares in the public issue, including both the fresh issues, the shares offered for sale and the greenshoe option.

All this means is that punters, especially those who did not own the shares, were just waiting to go for the kill as the stock listed at higher levels.

"This is not unusual in issues which come with a higher price tag and where there are a lot of leverage positions," says a foreign fund manager.

While aggressive offer pricing makes a compelling case for going short on a stock, traders can be doubly confident of a sell if the issue attracted a lot of investors who borrowed to subscribed to the issue.

Since leverage investors, usually come in for listing gains and look for exits on day one of listing, selling shares in intra-day trades that can be fairly profitable.

Usually shares open high, head higher as leveraged investors try to artificially push up demand in an attempt to get "decent" exits, and the stock finds its level based on genuine buying interest.

Of the 18 primary offerings made in 2005 till date, in 13 instances traded volumes on day one of listing was more than the total shares offered in the public issue.

Provogue, Gokaldas Exports, Indoco Remedies, UTV Software and Shopper Stop were some other issues where the total shares traded on the day of the debut exceeded the shares offered in the public issue.