Initial Public Offerings (IPOs) are often viewed as golden opportunities for retail investors hoping to invest in promising companies at ground-floor prices. The potential for quick listing gains and long-term growth draws a rush of individual investors to every hot IPO.
But here’s the harsh reality—most retail investors don’t receive any shares at all. Despite applying sincerely and following every step, many end up with rejection emails after rejection emails.Â
Why does this keep happening?
Let’s examine the reasons behind this consistent disappointment and, more importantly, explore smarter strategies, including pre-IPO investments, that can give you an edge.
1. Massive Oversubscription in the Retail Category
Every popular IPO attracts demand from hundreds of thousands of investors. For example, if an IPO is subscribed 15 times in the retail category, only 1 in 15 applicants will receive an allotment. The rest go empty-handed, regardless of how early or how much they applied.
2. SEBI’s Lottery-Based Allotment System
To ensure fairness, SEBI uses a lottery system where each valid application gets equal weight. This means applying for more than one lot does not improve your chances. In oversubscribed issues, it’s purely a matter of luck.
3. Dominance of High Net-Worth Individuals (HNIs)
HNIs apply through the Non-Institutional Investor (NII) category and often deploy large amounts, sometimes using margin funding. Their massive applications absorb significant shares and increase pressure across all categories, especially in hot IPOs.
Common Mistakes Retail Investors Make
●Submitting multiple applications with the same PAN – This leads to automatic rejection.
●Over-applying with large lots – Has no impact on oversubscribed IPOs. SEBI treats all retail applications equally.
●Applying at the last minute – Many investors miss out due to technical issues or banking delays.
●Ignoring the cut-off price – Bidding below the cut-off can lead to non-allotment if the final price is higher.
Looking Beyond IPOs: Consider Pre-IPO Investments
Many savvy investors are now turning to Pre-IPO investments—buying shares of private companies before they go public.
Benefits of Pre-IPO Investing:
●Access shares before the public rush
●Potential to invest at lower valuations
●Avoid the chaos of IPO oversubscription
●Greater potential for long-term compounding if chosen wisely
Supremus Angel helps investors access such Pre-IPO opportunities with expert guidance and verified listings.
Final Thoughts
Getting an IPO allotment as a retail investor is increasingly difficult due to the lottery-based system, intense oversubscription, and institutional dominance. While smart application strategies can improve your odds, it’s also wise to explore Pre-IPO investments as a complementary approach.
Stay informed, diversify your approach, and consider both primary and pre-market opportunities to truly grow your wealth.
