5 Biggest Myths About Investing in an IPO – Don’t Fall for These (2025)

The beauty of IPOs is that, like any other investment avenue, it has its own share of myths and fables surrounding it. One of the popular beliefs is that an initial public offering or IPO is a ticket to quick profits, which is not necessarily the case. There are other popular myths like the IPO share price will always list above the issue price i.e. at a premium. Maybe we just need to show them Paytm chart post listing. These are just a couple of myths pertaining to IPO investment and none of these ideas are backed by reality. However, myths are not born out of a vacuum. They have a basis in a view point that is perpetuated by brokers and media persons and partially experienced by the investors.

It is true that the IPO process or should we say the allotment process, is favourable to retail investors. This is true for all types of IPO in the market including fresh issues, offer for sale and follow-on public offers. Why are we talking about IPO myths at this juncture? Remember, when you formulate your IPO investment strategy, it is very important that you go through these myth busters. Some of these myths may appear to be very inane and some appear to be obvious. It is not about the myths. It is about knowing the real truth behind these popular myths and fallacies.

5 Biggest Myths About Investing in an IPO 

Actually, if you sit down to list the myths, you would get tens of them. However, for the sale of simplicity, we have distilled these into just five critical myths that can have a bearing on your IPO investment decision.

Table of Contents

1. 5 Biggest Myths About Investing in an IPO 
2. Myth 1: IPOs Always Deliver Quick Profits
3. Myth 2: Getting an IPO Allotment Is a Big Win
4. Myth 3: Big Brand IPOs Are Always Safe Investments
5. Myth 4: IPOs Are Strictly for Short-Term Trading
6. Myth 5: All IPOs Are Created Equal, in Terms of Regulation and Safety

Myth 1: IPOs Always Deliver Quick Profits

A lot of people believe that every IPO will provide quick listing gains, but that's not the case. Digital IPOs like Paytm, Zomato, Nykaa, and Policybazaar have actually experienced significant declines after their debut, leading to heavy losses for some investors. The performance of an IPO really depends on timing, sector trends, and valuation, rather than just the excitement surrounding it.

Myth 2: Getting an IPO Allotment Is a Big Win

Many investors think that simply getting shares in an IPO guarantees big profits. In reality, most companies go public to raise funds for expansion, pay off debt, or cover working capital. So, just receiving an allotment doesn’t ensure strong returns; it’s crucial to analyze the company’s fundamentals first.

Myth 3: Big Brand IPOs Are Always Safe Investments

Well-known companies aren't always safe options for investors. For instance, brands like TCS and Wipro went public many years after they were established, while digital firms had already rewarded private investors before reaching the IPO stage. By the time retail investors get involved, much of the early growth has already been captured by promoters and large funds.

Myth 4: IPOs Are Strictly for Short-Term Trading

Anchor investors provide credibility but are not long-term holders. Their lock-in period is between one to three months, and most exit as early as they can. While an IPO can provide short-term profits, its also possible for one to be an effective long-term investment if you select wisely.

Myth 5: All IPOs Are Created Equal, in Terms of Regulation and Safety

All IPOs are not created equal in terms of risk and reward. Riskier offerings like Paytm and CarTrade led to wealth destruction, while relatively safer ones like Adani Wilmar gave strong returns. Higher risk does not guarantee higher returns, investors need to do proper research before investing.