InvestorQ : Is it bad if the promoters are exiting from the company?
Shreya Mashelkar made post

Is it bad if the promoters are exiting from the company?

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Rashi Mehra answered.
3 years ago
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All promoters do dilute some part of their stake in an IPO. They need to monetize their wealth, after all. But aggressive selling is not a good sign. This is a point that can raise a question mark over the issue. IPOs are structured either in the form of a new issue or an offer-for-sale. While a new issue entails issue of fresh equity and dilution of equity, an offer-for-sale entails sale of shares by an existing shareholder. As an IPO investor you need to check if the promoter group is exiting the company in a big way through the IPO. For example, Narayana Hrudayalaya was an offer-for-sale wherein the promoters and some of the anchor investors exited partially through the IPO. It is always advisable to be cautious about such issues.

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