Why should you not buy technology startups' IPOs like Zomato or Paytm?

 Technological startups nowadays are very popular. Recently on July 14, 2021, Zomato launched its IPO. It is 200% subscribed between July 14 to July 16. A share of Zomato would cost around rupees 70. 


Expert Shankar Sharma commented, "new technology startups like Zomato and Paytm are unlikely to become the next TCS for HDFC". I agree with this. 


When asked "why other financial institutions are buying it?" Shankar replied it is FOMO or in the Hindi language we call the term 'BhedChaal', which means running with the crowd." 


The financial institutions are looking at other financial institutions and comparing their portfolio with them. 


In such cases, the retail investors do well, because they know 'how to say no'. 


The reason why Zomato or similar technology startups like Lyft, Grubhub, UberEats, Paytm etc. are unlikely to become giants like TCS or HDFC is that the giants like TCS do not burn cash to acquire new employees and customers. 


Is the Zomato IPO overhyped? 


Certainly, it is. Zomato and similar technological startups may advertise themselves by saying that 'in the recent era of lockdown we were the only ones moving, so we are successful. But the truth is that they are nowhere successful. Their IPO is overhyped, similar to Reliance Power. 


Should you invest only in those companies which offer dividends? 


Yes, you should. Loss-making companies such as Zomato and similar technological startups cannot offer dividends till they make any profits. Such companies are only running by false valuations. On the same old principle of demand and supply. Plate until people do not find out the reality. 


In reality, these companies have no value. 


What should be the new strategy of investing? 


Don't buy an IPO in haste: Be patient about using your money. Moreover, be wise while investing. 


99% of startups fail: So it is upon your personal choice whether you want to subscribe to such startups.


Know the real value: Company's represented value is not the real value. First of all, you should research whether a company is profit-making or not. If a company is loss-making already, then why should you subscribe to it? But a wise investor will argue, "it is the company's present value, it could be a profit-making company in the future." 'Could be' does not mean 'would be.


Berkshire Hathaway was initially a loss-making company when Warren Buffett bought it. Buffett says 'it was one of the biggest mistakes of my life. Though Berkshire Hathaway is now a profit-making company. But Warren was one of the pillars to make it a profit-making company. 


Unless and until you are not the major shareholder of a company you are not going to make it successful. 


Thank you.

Comments

Popular Posts