Hurdles on Street: Investors miss out on top IPOs in US | Economic Times

Mumbai: Our craze for IPO subscription is not limited to Burger King or Mrs Bectors’ Food, but several thousand Robinhood investors were interested in subscribing to Airbnb’s initial share sale Stateside.But all of them were disappointed as none of the domestic brokerages or standalone platforms are currently allowing them to subscribe to US IPOs due to procedural issues.Unlike in India, IPOs in the US are allotted directly by the bankers mostly to institutions and ultra-rich investors with a bigger lot size. Although bankers allot some portion of the IPO to their clients, the minimum ticket size would be much more than $250,000 which is the upper limit for Indians to invest in foreign stocks through the Liberalised Remittance Scheme (LRS) route, said brokers.“We have massive demand for tech IPOs among Indian customers because people have been following these start-ups for a long time and are also generally very interested in US tech companies,” said Sitashwa Srivastava, founder and CEO, Stockal. “In the US markets, IPOs are allotted 90 per cent to institutions and 10 per cent to retail. So, not just Indian retail investors, even for US retail investors, it is not easy to get allotment in IPOs,” he added.79788649Domestic brokerages have tied up with platforms like Stockal, Vested Finance, Interactive Brokers or Winvesta to provide services to invest in global stocks. When contacted, most of the domestic brokerages said that their technology platform partners do not allow them to subscribe US IPOs due to procedural issues.“There is no exchange driven process in the US to allot IPOs like in India,” said Viram Shah, Co-Founder, Vested Finance, “IPOs are underwritten by the bankers who allot the shares to institutions and to their clients.”Airbnb IPO, which was priced at $68 per share, went on to hit an intraday high of $ 165 per share on the listing day on December 10 before closing at $144.70. There is constant hype around IPOs in the US and shares rally immediately after listing, but investing in IPOs typically does not generate good returns, shows historical data. The average 6 months returns after IPO in the US is 2 per cent, while the median is 1 per cent.When a company goes public, the insiders including management and private investors have to hold on to their stock for six months before they sell. The company share price can move wildly during this period.Under the LRS route, Indians can invest upto $2.5 lakh in foreign stocks. A lot of domestic brokerages and standalone platforms such as ICICI Securities, Axis Securities, Kotak Securities, HDFC Securities, Geojit Financial Services, Upstox, Matertrust, Winvesta, Stockal among others are now allowing Indians to invest directly in the US stock market.A few international brokerage firms like Interactive Brokers, TD Ameritrade, Charles Schwab also allow Indians to set up an account and trade in US stocks, mutual funds and ETFs.“It would be possible for Indians to subscribe to US IPOs only when platforms tie up with US banks and the Indian government increases or removes the upper limit of $ 2.5 lakh to invest in global stocks," said Viram Shah of Vested Finance.Indians can buy any stock post listing and there is no minimum investment size. Retail investors can invest as low as $1 for high priced shares by making investment in less than one stock.