How To Sell IPO Shares?

You can sell IPO shares after the shares have been listed on the stock exchange. This can be done through your broker’s online web or mobile platform. It’s simply a one-click process.

A common question might come to your mind, like how to decide whether or not to sell my IPO shares. This article provides a step-by-step process for selling IPO shares and factors to consider before selling.

How To Sell IPO Shares?

The process of selling IPO shares is similar for almost all the major brokerage platforms. After the shares have been listed, follow the steps below.

Step 1.	Log in to your demat account on the web portal or mobile application using your login credentials.
Step 2.	Open the holdings or positions section, there you will find the shares allotted in the IPO.
Step 3.	Click on the shares. A pop-up window will open. Click on the sell button.
Step 4.	Insert the quantity of shares to sell at the current market price or choose a limit price to sell the shares.
Step 5.	Your IPO shares will be sold at a profit or loss as per the price option selected by you.

5 Factors To Consider Before Selling IPO Shares

Investors must consider the factors given below before they proceed to sell their IPO shares in the market.

1. Listing Day Performance: It is important to track the listing day performance. If the price opens at a premium and shows signs of strength, it might be a good idea to hold while booking a partial profit. If the price opens below or around the bid price and shows signs of weakness, selling the IPO shares right away might be the wise decision.
2. Investment Goal: The investment goals, both long-term and short-term, are important to keep in mind. If the fundamentals are strong and IPO shares show decent listing gains, then they could be held for a long period. Holding quality shares right from the IPO can generate long-term wealth.
3. Company Fundamentals: After the IPO, revisit the analysis board and decide if the share price correctly reflects the company’s current standing. Based on the new analysis, decide whether to hold the shares or sell them.
4. Promoter Activity: Promoters usually have a large shareholding in companies and tend to exit either partially or completely after the IPO lock-in period has passed. Investors must check if there is any alarming shareholding pattern occurring in the stock post IPO.
5. Market Sentiments: It is important to take note of the market sentiment. In a bull market, IPO shares generally perform well, while in a bear market, even food IPOs can fail to generate decent returns.

Strategy for Selling IPO Shares

• The price movement for IPO shares is hard to predict. Most of it is based on sentiment and financial performance in the latest quarter.

• If the price opens at a gain, a partial profit booking strategy can be used. On listing day, sell some shares to recover the investment cost plus some profit. Hold the remaining shares for riding the uptrend. In case the price reverses, exit at the opening price. This way, you will secure some profit.

• If the sentiment is not positive, try selling all the shares at the opening bell.

Advantages of Selling IPO Shares

• Quick Profits by immediately selling shares in the market.
• Reduced exposure as IPO shares can show extreme volatility.
• Capital reallocation can be done to better opportunities within or outside the equity market.
• Risk management is taken care of.
• Fulfills short-term money-related goals

Disadvantages of Selling IPO Shares

• Missing long-term growth and potential returns.
• Tax implications of 20% will be applicable in the form of STCG (Short Term Capital Gains)
• Reinvestment risk if the next investment from reallocation of funds does not perform well.

Final Thoughts

Selling IPO shares is an easy process. Investors can sell their IPO shares on the day of listing or a few days later. The decision of selling the IPO shares or holding them depends on the discussed factors taken into account by the investors.

In either case, managing risk and avoiding loss of capital should be the top priority. To do so, booking partial profit can be helpful in case there are listing gains.

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