{"id":11650,"date":"2024-07-03T10:00:05","date_gmt":"2024-07-03T04:30:05","guid":{"rendered":"https:\/\/gtm360.com\/blog\/?p=11650"},"modified":"2024-07-16T18:07:55","modified_gmt":"2024-07-16T12:37:55","slug":"securities-regulator-is-not-financial-advisor","status":"publish","type":"post","link":"https:\/\/gtm360.com\/blog\/2024\/07\/03\/securities-regulator-is-not-financial-advisor\/","title":{"rendered":"Securities Regulator Is Not Financial Advisor"},"content":{"rendered":"

Every time a stock tanks after an IPO, the common man or woman (henceforth J6P<\/em>) blames Securities and Exchange Board of India<\/em><\/strong>, the securities \/ capital markets regulator of India.<\/p>\n

The common rants against SEBI are<\/p>\n

    \n
  1. Loss-making companies were allowed to IPO<\/li>\n
  2. The offer price was too high<\/li>\n
  3. Promoters dumped their shares on retail investors<\/li>\n
  4. Issuer committed fraud<\/li>\n
  5. Retail investors’ interest wasn’t protected.<\/li>\n<\/ol>\n

    Take this post on LinkedIn for example:<\/p>\n

    \n
    OP<\/strong><\/a>: Role of SEC \/ SEBI \/ any market regulator is to ensure a common man is not at a disadvantage compared to the institutional investors.<\/div>\n<\/blockquote>\n

    <\/p>\n

    This worldview betrays lack of understanding of the IPO process and the remit of the securities regulator.<\/p>\n

    IPO process<\/strong><\/p>\n

    Until Zomato’s IPO in July 2021, SEBI never permitted loss-making companies to IPO in India. IIRC, companies had to have three consecutive years of profits before they could raise capital from the Indian public. During that regulatory regime, several Internet startups listed in NYSE or Nasdaq in USA, where seasoned investors didn’t care too much about profit in the short or medium term\u00a0e.g. MakeMyTrip<\/em>.<\/p>\n

    \n

    Years to profitability in Tech: 8 years after IPO.
    \n“Many tech companies turn a profit about eight years after their IPO” ~ Snowflake CFO Mike Scarpelli via     https:\/\/t.co\/AMEa9bx34E<\/a><\/p>\n

    \u2014 Ketharaman Swaminathan (@s_ketharaman) January 25, 2024<\/a><\/p><\/blockquote>\n