Flipping Behaviour! 54% Of IPO Shares Allotted To Investors Are Sold Within A Week: Sebi

Market watchdog SEBI observes a flipping behaviour among investors of IPO. The regulator's latest study shows that about 54% of IPO shares allotted to investors are sold within a week. These investors are excluding anchor investors. Sebi said, that in light of the increasing participation of retail investors and the heightened oversubscription in recent IPOs, it conducted an in-depth study to analyze investor behaviour in Main Board IPOs.

The study encompasses data from 144 IPOs listed between April 2021 and December 2023, data from Sebi showed.

Here are the key findings of the study by Sebi:

1. "Flipping" behaviour among Individual Investors: Individual investors sold 50% of the shares allotted to them by value within a week of listing, and 70% of shares by value within a year.

2. Disposition effect evident among Investors: The study found a strong disposition effect, with investors showing a greater propensity to sell IPO shares that posted positive listing gains, compared to those that listed at a loss.

3. Returns influencing the selling behaviour: When IPO returns exceeded 20%, individual investors sold 67.6% of the shares by value within a week. In contrast, only 23.3% of shares by value were sold when returns were negative.

4. Surge in Demat accounts post-COVID: Nearly half of the demat accounts that applied for IPOs between April 2021 and December 2023 were opened during the post-COVID period (i.e., 2021-2023).

It said, following SEBI's policy interventions regarding the Non-Institutional Investor (NII) share allotment process and RBI's guidelines on IPO financing by NBFCs in April 2022, the following trends were observed:

- Significant reduction in NII category oversubscription: Oversubscription under the NII category halved from 38 times to 17 times.

- Sharp decline in applications from "Big Ticket NII Investors": The average number of applications from NII investors applying for more than ₹1 crore in IPOs dropped from approximately 626 per IPO in the pre-policy period (April 2021 - March 2022) to around 20 per IPO in the post-policy period (April 2022 - December 2023). Note that the total funds raised during the two periods were comparable.