‘Phenomenally stupid’: Zerodha’s Nithin Kamath warns against blind pre-IPO frenzy as unlisted markets boom

Zerodha founder and CEO Nithin Kamath has issued a stark warning to retail investors, who are caught up in the speculative FOMO (fear of missing out) that has gripped India’s unlisted market. In a candid post onNoting the steep valuations assigned to many IPO-bound companies, Kamath said these stocks are trading at a 100-500% premium and many recent listings have been big disappointments.

“Given how popular the IPO market is, I hear some phenomenally stupid stories coming out of the privately held market. People are blindly betting on so-called ‘pre-IPO’ companies in the hope that they will make bigger profits than during the actual IPO. The greed is causing people to ignore some harsh realities: These stocks already come with 100-500% profit margins, ridiculous commissions and terrible prices. The biggest risk? There have been countless cases where the IPO price came in lower than the price at which people bought shares in the unlisted market. All those ‘gains’ were wiped out before you even started,” Kamath said.The Zerodha founder expressed surprise at the speed and scale at which unlisted stocks have become popular and shared how a platform bombarded investors with WhatsApp messages.

“I honestly didn’t expect the unlisted equity space to become so popular. Colleagues showed me a platform that was sending WhatsApp blasts to promote this kind of stuff. It’s kind of crazy what’s happening there,” Kamath said.

Kamath has been speaking for some time about the need for better financial awareness among Indian investors. His latest warning comes amid a red-hot primary market where strong quotes have encouraged a new wave of speculative activity – especially in the opaque, lightly regulated world of unlisted shares. His message to investors is a warning against FOMO overriding common sense. In his recent tweet, Kamath also warned investors about the dangers associated with cryptocurrency derivatives trading. Comparing it to Shrodinger’s cat, Kamath said the exchanges are in a regulatory zone – neither fully regulated nor unregulated, and investors are at risk of going bankrupt. He also explains why it could be in the platform’s best interest if traders trading on it lose money.

Also read: Zerodha’s Nithin Kamath Spots Dangers in Crypto F&O and Explains Why It Could Be in the Platform’s Interest if Traders Lose Money

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