The curse of overpricing a very large marquee IPO will always be more than just about numbers. People will not see it as a one-off. The credibility of an ecosystem that was built over months can easily be destroyed in a day. What the markets saw evolve into strongly motivated investor buying in IPOs can simply collapse over a few trading sessions. Sentiment can simply sink without a comeback or resistance.
Events simply unfold on the markets without much resistance. The effect is felt even on companies that hardly raised capital in years. A collapse can even result if markets don’t find the collective courage to get over the damage done by a poorly priced IPO.
The trouble is that such a collapse does not permit easy rebuilding. It is an uphill task to lend or lease back the lost credibility. The fact that investment bankers brought out a heavily overpriced issue that collapsed on listing day without any buyers at the close of trading, will affect the upcoming issues. Raising capital from the public, which is very central to creating fresh assets, will become a very tall ask. It remains to be seen if the markets show resilience to do damage control quickly.
Right now, it appears to be the toughest test faced by the market in a long time.
