IF YOU FIND AN IPO UNATTRACTIVE, DON'T INVEST IN IT

Lenskart's initial public offer (IPO) has triggered a familiar pattern on social media.

- DHIRENDRA KUMAR

The company filed for the IPO at a valuation that seemed stratospheric. Within hours, social media came out with damning discoveries. The promoters had reportedly acquired shares just two or three months earlier at roughly one-eighth the valuation they were now asking public investors to pay. The company had been a perpetual lossmaker, but turned profitable this year due to a non-cash, onetime accounting entry. The outrage was swift and predictable.

The IPO looks overpriced by any reasonable measure. I personally find such public offers unattractive and generally caution retail investors against them. The gap between what insiders paid recently and what they are asking the public to pay is particularly galling. When you combine that with a business that has never demonstrated the ability to make consistent profits, you have all the ingredients of a wealth transfer from naive investors to savvy promoters and early backers. Of course, this is not just about Lenskart; a whole queue of such IPOs is lined up behind it.