Why has the SEBI chief spoken about IPO regulation of new age companies?

What has perhaps prompted the SEBI chief to hint at additional regulation and disclosure practices for new age IPO is the recent performance of some of the newly listed digital IPOs. In the last few months, a slew of IPOs including Paytm, Nykaa, Policybazaar and Zomato lost more than 40-50% from their recent post-IPO peaks. To address this issue of investor confidence, the SEBI wants to make these companies disclose more in the prospectus.

In a way, there is an interesting background to this proposed regulation by SEBI. There was a lot of euphoria when the first mega IPO of Zomato was launched. Not only was it heavily oversubscribed, but even post listing performance was enviable. In recent times, the stock has fallen over 50% and near to IPO price levels. This damage was seen across most recently listed digital IPO like Zomato, CarTrade, Nykaa, Paytm and Policybazaar. That is the trigger.

Like in most cases, it is about the gap between expectations and reality. Investors expected these stock to give a runaway rally post listing. They also expected a rapid turnaround and they believed that a huge institutional investor base would mean support at lower prices. Most stocks fell vertically amidst downgrades. This engendered an absolute carnage in most of the recently listed IPOs. This resulted in big losses for investors and a jolt to confidence.