PDASH Touch
Some investors have the MIDAS touch.
You may have heard of Warren Buffet, the world’s savviest investor, and Rakesh
Jhunjhunwala, India’s smartest. Anything they touch turns to gold. Anything
that I touch instantly turns to dross. It’s sheer magic, the PDASH touch.
I’m not pulling a fast one. Ready to
offer solid, incontrovertible evidence. The Market never lies! LIC listed on
BSE on 17 May 2022 at 867.2 per share at a discount of 8.62 % from its IPO
allotment price. PDASH touch worked like magic, once again!
LIC IPO Issue Price was 949 per share.
As policy holders, I and my spouse got an attractive discount of 60 and paid
889 per share. As I write this piece, at 10:43 0n 20 May 2022, LIC share price
is 845.85. Thus, our loss per share is a little more than 43.
A former Finance Secretary, now the
Chief Advisor to a private company, forecasts that LIC share will crash to 450
or thereabouts. The market will find the right valuation for the Company, he
says, implying that the valuation by the government and the bankers was
overhyped. I wonder why he didn’t forewarn the investors. Maybe he was
apprehensive of being charged with sedition for sabotaging the country’s
largest IPO by a PSU. Once the issue had been fully subscribed, and the money
was in the government’s pocket, no one can accuse him of ulterior motives.
Paytm IPO
In Nov 2021, Paytm (One 97 Communications)
issued IPO of 18300 crores, the largest private sector IPO till date. Among the
major investors in Paytm are reputed global companies like Soft Bank, Ant
Financial, SAIF Partners and Berkshire Hathaway and others. The Company was in
loss, and the cash burn rate would continue in the foreseeable future, it was
predicted. Yet, the Company was valued at a staggering USD 20 billion (Rs 1.48
lac crores). The Issue Price was 2150. I subscribed to the IPO. The IPO bombed.
On 20 May 2022, the share price was 570.25, with a loss of 73.48% against the
issue price.
Had any brokerage house forewarned the
investors? No, everyone was gung ho. India’s most valued Unicorn, growing
rapidly, under the CEO’s visionary leadership, and bound to be a mega winner. Why would Warren Buffet bet on a loser? His
Company, Berkshire Hathaway is invested in Paytm. That’s a vote of confidence
in the company’s bright future!
No one speculated that it could be a
big loser, and the market would thumb it down and pull down the astronomical
market valuation to pragmatic levels. Paytm CEO is unusually quiet after the
IPO debacle, no longer the darling poster-boy of the new digital economy.
Coal India IPO
In Oct 2010, Coal India IPO of 15475 crores
was issued. The divestment of the Maharatna Company was touted as a wonderful
opportunity for the retail investors to own a piece of the star PSU. How could
a pragmatic investor let go of this opportunity? FOMO is hard to overcome. I
subscribed to the IPO. The IPO bombed. The issue price was 245, and the share price
on 20/05/22 was 185, a loss of 24.5% against the issue price.
Winner IPOs
I did not bet on any of the winners-
Nykaa, UPL, Vedant Fashion, Veranda Learning (ever heard the name? What does
the Co do?), and others. I have the uncanny ability to spot a loser from a
distance and go for it. The dark, irresistible appeal of temptation. The
forbidden apple. As soon as I take a bite, I’m expelled from the heaven of assured,
perpetual profit.
BRAN
Each IPO issues a DRHP, i.e., Draft
Red Herring Prospectus. Don’t bother about the meaning of a Red Herring. It is
a Warning by the Issuer’s Banker: You must read this document, which comes in
only 500 pages in small print, to figure out the risks and rewards, and decide
about the investment. You could lose all your money. Don’t tell we didn’t
forewarn you. Invest at your own RISK.
I must confess that I never read the
DRHP for the above-mentioned IPOs, though I read the pink papers and also tuned
in to the informed recommendations of veteran brokers. Everyone issues a
Disclaimer: My views are personal, your investments are at your own risk!
Since the Issuers are always asking me
to read DRHP, I’ve prepared a BRAN for them to read. What is BRAN? Simple,
Brief Red Alert Notice. As soon as an Issuer launches an IPO, I plan to send
notice to them of my resolve to invest in the Issue to the maximum limit of Rs
2 lacs permitted to a retail buyer. Since my investment, an albatross around
their neck, would spell doom for their future prospects, the Company should
take my offer: a modest 20% return on 2 lacs. That’s peanuts for the Company.
Upon IMPS transfer of the said amount (fee for advisory services) to my bank
account, I solemnly promise NOT to invest in that company’s IPO or in their
shares thereafter. I am an honorable man, and always keep my words.
Moral
In the 1987 film ‘Wall Street’, there
is a memorable quote on greed by Gordon Gekko, played by the inimitable Michael
Douglas:
“The point is, ladies and gentlemen,
that greed, for lack of a better word, is good. Greed is right. Greed works.
Greed clarifies, cuts through and captures the essence of the evolutionary
spirit. Greed, in all of its forms - greed
for life, for money, for love, knowledge - has marked the upward surge of
mankind.”
I love Gekko’s eloquent defence of
greed, which is based on Milton Friedman's views on capitalism and free enterprise. Alas, it has not worked for me. Greed is no good. I now recall that it is one of the seven deadly sins, listed by Pope Gregory I in 600 AD.
My new resolution is: Never again
subscribe to an IPO, public sector or private, big or small, recommended or
not. No stocks, no Bonds (not even Sovereign Bonds). Stay safe with a PSU Bank
FD with a post-tax ROI of 4%! What if inflation of 10% gives a net negative
return? That’s smart strategy by the sarkar to make investors contribute to nation-building!
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Note:
- Author's profile may be seen at http://amazon.com/author/pkdash
- Books by this author are available on Amazon.in, Kindle eBook, Flipkart, and Notion Press, Chennai.
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