IPO Underpricing and Media Sentiments: Avenue Supermarts and Vaswani Industries

Abstract

This case tries to analyse the impact of media sentiments on Initial Public Offering (IPO) underpricing. To delve deeper into the concept, two firms (Avenue Supermarts and Vaswani Industries Limited) are considered in this case, and the significance of media sentiments on IPO underpricing is highlighted. Through these two real-life examples, the case could show that the manner in which media reports an IPO can significantly impact their first-day returns. 1 This highlights the emerging role of qualitative data apart from quantitative data in explaining the dilemma of IPO underpricing. This case will try to encourage the discussion in the class regarding the role of media in explaining the reasons for high over/under priced IPOs. This facilitates discussion on the emerging role of behaviour finance in decision-making. This case also provides new learning to students regarding dealing with qualitative data in finance and basics of sentiment analysis. Dilemma: How to match the expectation of the market for pricing of an IPO. Theory: Information asymmetry Type of the case: Decisional and applied Protagonist: Not needed Options Underwriters can price the IPO below the price institutional investors are ready to pay or above it. Discussions and Case Questions What is the role of institutional investors? What will happen if the locking period is waived for the institutional investors? What are the sources of information for retail investors? Describe the role of media in influencing the sentiment of small investors.