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The BSE SME IPO of Resourceful Automobile, which made a buzz in the market, as well as garnered significant attention on social media platforms, has debuted on the stock market with its shares listing flat Rs 117 apiece on the BSE SME, leaving many investors disappointed as the IPO listed lower than the expectations.
The flat debut was a stark contrast to the higher expectation set by the Grey Market Premium (GMP), which estimated a potential listing price of Rs 222 apiece, an 89.74 per cent premium over the issue price.
Grey Market Hype Versus Reality
Ahead of the listing of the company, the grey market created a buzz with activities around the Resourceful Automobiles IPO.
The Grey Market, which is an unofficial marketplace where shares are traded before they officially get listed, often plays as a predictor and investor sentiments on the listing day performance. Nonetheless, the shares of the company were trading at a hefty premium of Rs 105.
Resourceful Automobile Makes Flat Debut At ₹117 On BSE SME Despite High Expectations | Representative Image
However, in contrast, in reality, the stock market debut did not match the GMP hype, leading to many questions such as what might have gone wrong.
Understanding the Discrepancy
So let's take a look at what might be the possible reason behind the Resourceful shares failing to live up to expectations.
One of the potential reasons might be that despite its strong subscription numbers, that is, the IPO which ran from August 22 to August 26, 2024, was oversubscribed 418.82 times, the investors may have reassessed the company’s fundamentals and future growth prospects more critically as the listing date approached.
Another reason for the flat debut of Resourceful Automobile on the stock market is the company's growth and scalability. The company operating under the brand "Sawhney Automobiles," runs just two Yamaha 2-wheeler showrooms in New Delhi and has just 8 employees, which could have led some investors to reconsider the growth potential and scalability of the business.
SEBI’s Warning Amid SME IPO Frenzy
Cautioning investors about the risks associated with SME IPOs, the market regulator SEBI on August 28 also issued an advisory on it. Furthermore, this flat listing also came on the heels of a SEBI advisory.
Representative Image/File | FPJ Library
The market watchdog in its latest advisory has warned investors to be cautious of companies that might paint an overly positive picture and advised against relying on social media tips or rumors.
With SME IPOs experiencing massive oversubscriptions and high volatility, this advisory may have influenced investor behaviour, leading to more cautious bidding and trading in Resourceful Automobile's shares.
