The price band for an IPO need not always be the right remedy to bring down high volatility on the day of the listing, as well as on the few days thereafter. One needs to look at the structure of the IPO market in its totality to solve the issue on a long-term basis.
First and foremost, all institutional investors should be paying the full amount of the application as in the case of a retail investor. This will solve the psychological impact of communication on retail investors being associated with the number of times an issue is oversubscribed.
Then one could assume that it is all risk capital that is invested in the IPO and that it is fully paid on the part of the investors. In such a scenario, there is probably a case for using the stock exchange margining system appropriately, to provide a safe landing situation to an IPO in the secondary market.
Today, the speculators, particularly at the retail level, try to grab a newly listed stock after paying a relatively small margin or through the margin funding route of the stock exchange.
First and foremost, all institutional investors should be paying the full amount of the application as in the case of a retail investor. This will solve the psychological impact of communication on retail investors being associated with the number of times an issue is oversubscribed.
Then one could assume that it is all risk capital that is invested in the IPO and that it is fully paid on the part of the investors. In such a scenario, there is probably a case for using the stock exchange margining system appropriately, to provide a safe landing situation to an IPO in the secondary market.
Today, the speculators, particularly at the retail level, try to grab a newly listed stock after paying a relatively small margin or through the margin funding route of the stock exchange.
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