Determination of IPO price by auction does increase the probability of pricing the issue much closer to the open market level as compared to any other form of discovery of price. By definition, the auction process is much closer to the open market but with out circuit breaker given the enabling controlled environment, effectively supervised by the Regulator for compliance.
Hence a solution could be, to put in place a system where IPO prices can be determined through auction, at the option of issuer, but with a lower limit on the price of the scrip, specified by the issuer, below which he may with draw the issue. With such an approach, the investor, especially the retail investor and HNI investors get a better role to play in the determination of price. This system will also usher in a mind set, where long term (read 2 to 3 years) outlook is essential to capture the value of the scrip.
In a developing economy like ours where the stock market is discovering new growth stories every month, we need to move to an auction platform quickly so that the issuer is provided an alternate option and is not necessarily compelled to accept the price suggested by the "Book Builder".
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