Summary
Highlights
Almost two-thirds of IPO companies in Malaysia, listed between January 2022 and December 2025, are trading below their IPO price. This is largely due to overstated fundamentals and inflated valuations at the time of listing, driven by various financial interests.
The top 10 worst performing IPOs include several tech companies and retail distributors. Obstar, for example, is down 85% since its listing. This analysis often uses the closing price of the first day, but even when considering IPO price, many are still significantly lower. A key lesson is to avoid buying on the first day, unless you are selling immediately or day trading.
Companies tend to present very attractive numbers during IPOs to generate hype and secure higher valuations for early investors, promoters, and investment bankers. Warren Buffett is skeptical of IPOs, viewing them as driven by 'animal spirits.' There's often a push to maximize valuations for all parties involved.
Many IPOs are listed at expensive valuations. While some, like Sang Hing, are not 'crazy rich,' others like MSD Golf had higher valuations than tech companies in chip design, despite having less pricing power. This suggests an issue with value perception at listing.
A rare but critical red flag is when founders pledge their securities, especially detailed in IPO prospectuses. This can lead to margin calls and steep share price falls, as seen with Cape EMS Bahhat, signaling potential financial distress or poor decision-making from management.
Many IPO companies fail to compete effectively in their industries, leading to deteriorating fundamentals. Examples like ECA and OPSA, despite being in the growing tech sector, couldn't match the success of peers like Pentamaster or Vrox. This highlights issues with management or fundamental flaws in their business models.
Companies often employ accounting tactics before listing to present favorable financial figures. This includes categorizing and re-categorizing sales, earnings, and expenses, sometimes pushing expenses post-listing and pulling revenues forward, all within legal boundaries, to make their numbers look 'very nice' for the IPO.
Other companies like SFP Tech, Infoline Tech, and Synergy Bart initially performed well but eventually declined due to fundamental issues, such as an inability to sustain revenue and profit growth or losing customer demand. Recent IPOs, such as BMS, often see immediate drops in share price after listing, showing a predictable trend of short-term volatility.
Not all IPOs are bad. Successful IPOs are typically found in thriving industries like data centers, renewable energy, and pawn brokering. Companies like MN Holding (data centers) and KGTS (renewable energy) demonstrate sustained earnings growth, leading to significant increases in their share prices. Growth in profits and understanding the industry's trajectory are key factors for success.
Investors can increase their success rate by selling on the first day, especially if they are unsure about the company's long-term prospects. Be cautious of founders pledging securities, as this can be a significant risk. Prioritize revenue and earnings growth over initial valuation, as continuous growth is crucial. Some companies, like IAB, Insights Analytics, and THMY, have shown strong post-IPO performance, although their long-term sustainability still needs to be monitored.
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