Appealing for investors through IPO advertisements

Abstract

Companies sometime advertise their products and potential for growth before issuing new stocks or bonds in the market. In the beginning, advertisements for IPOs and mutual funds were primarily attention-drawing. They lacked many important disclosures like price-related information, company information, use of proceeds, etc. making optimal investment decisions. Later advertisements have become more responsible, with the complete disclosure of possible returns and risks. Disclosure of information increases the acceptability of the company among investors leading to more efficient investment decisions. The present study aims to determine the impact of IPO advertisements on Indian investors and the influence of various possible biases that could make those investors make irrational decisions. Primary data collected through structured interview from the investors, is used for the study. The findings confirm that in India, investors who go for IPOs demand more useful and trustworthy disclosures in the advertisements and brochures brought out by the firms. The results are expected to interest academicians and firms who intend to float shares in the primary market.