Tiny IPOs Become New Favorite in Turks’ Love of Small Stocks
Tiny IPOs Add Fuel to Surge in Turkey’s Small-Cap Stocks
(Bloomberg) -- Shares of small Turkish companies are one of the hottest areas of global stocks this year, and nowhere is the frenzy more pronounced than in the market for initial public offerings.
Five of this year’s IPOs in Istanbul have risen at least 45% in their first five days of trading, and all remain above their offering prices. Technology consulting company ARD Grup Bilisim Teknolojileri AS has surged more than sevenfold since it went public at the end of January. The sixth new stock, Kontrolmatik Enerji Ve Muhendislik AS, attracted demand for 26 times the available shares last week.
Behind the enthusiasm lies the growing conviction among individual investors that their fortune lies in equities. Turkey’s retail buyers have been rushing into stocks amid lackluster returns in fixed-income products and savings accounts, a trend that accelerated during the pandemic-induced lockdown. The Borsa Istanbul SME Index, a gauge of the smaller companies favored by mom-and-pop investors, is up 307% this year, compared with a 6.5% gain for the benchmark BIST 100 Index.
“This is the new hype,” said Huseyin Akyar, a 37-year-old salesman at a textile company. “I don’t care which company goes public, I don’t need to know any details. I will be buying as much as I can, as long as the hype goes on. I know it sounds a bit like a Ponzi scheme, but I don’t see an issue if I’m making money.”
Gedik Investment’s website collapsed as the firm took orders last week for the Kontrolmatik IPO. The brokerage’s Twitter account was the target of furious investors who were unable to purchase the new stock. The company, which provides technology services to power plants and electric transmission facilities, gained 9.9% in its first day of trading Tuesday and another 10% on Wednesday.
Given that the new offerings are small, with a limited number of shares issued, and demand is huge, investors don’t have much concern that the stocks will drop in initial trading.
“It’s easy to jump onto the IPO wagon without being afraid,” said Sener Cavus, a 32-year-old investor who is in the retail business. “This has become a way of having fun with other investor friends, we race each other to buy stocks. It also feels a bit like gambling.”
When the market turns, that feeling of fun will quickly dissipate, according to Taner Ozarslan, founding partner at Istanbul-based financial adviser Sparta & Co.
“All investors buying IPOs are earning well now, but they might lose one day,” he said, possibly when the market regulator allows bigger offerings.
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