Post-IPO Stock Surge: The rise in stock prices after IPO could be due to demand and supply factors, as well as settlement mechanism. Structural deficiencies are trapping short sellers and spoiling early trading activity.
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This was said by Zerodha’s co-founder and CEO Nitin Kamath, who posted about it on the social media platform. He also said that savvy investors can benefit from this.
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In a (Post-IPO Stock Surge) post on LinkedIn and
Many traders try to short these stocks intraday thinking that the price will fall. However, if the stock reaches the upper circuit, they are stuck. They have no buyer to sell their stock. This is called short delivery.
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After this the exchange conducts auction to settle the trade.
Kamath further explained, “When this happens, the exchange conducts auctions to settle the trades between 2:30 PM and 3:00 PM the next day. These auctions can be at a much higher premium to the market price. For example, the auction price of Meesho was ₹258, while the market price at that time was around ₹226.
If you have these stocks in your demat account, you can sell your shares directly during this auction. “This is a great way to get out at a potentially higher price and also helps the exchange settle the trade.”
Kamath further said that this method has also been started on Zerodha platform. Retail shareholders can participate directly and benefit from their holdings.
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