How to evaluate an IPO before you apply

An IPO is a company selling shares to you at a price it chose. Your job is to decide whether that price is fair, not whether the issue is popular.

Check the object of the issue. Money used to build capacity or repay expensive debt is very different from money that only goes to selling shareholders.

Check three years of revenue and operating margins, promoter holding after listing, related-party transactions, valuation against listed peers, and the risk factors section, which is the most honest part of any prospectus.

If the numbers work only when you assume the best year repeats forever, treat the listing pop as a bonus and size the application accordingly.