How social media influencers are creating IPO buzz

The Delhi-based social media influencer has been adding 15,000 to 20,000 new followers every month, and he’s not the only one. As markets reached record highs, and the IPO market boomed, Indian market participants are skewing younger and younger. In the last 18 months, 29 million new demat accounts were opened, and the average age of a new demat account holder has also come down to 29.

Younger investors lean towards picking tech stocks and are also heavy users of social media. Market observers say that the majority of Indian retail investors put money in IPOs without doing any research on the company and without even reading the company’s DHRP or RHP.

Their decision is driven by one or a combination of a few factors: euphoria around the bull market, the hype around popular companies like Zomato, Nykaa and Zomato, the big listing gains that a few recent IPOs have recorded, a cursory look at high grey market prices, buzz in informal WhatsApp/Telegram groups, or views of influencers on Youtube.

“Social media is playing an important role in identifying investment opportunities and creating buzz around companies and IPOs,” says Neil Bahal, Founder & CEO, Negen Capital. “If top 4–5 influencers talk about a company, it makes a difference.”

On November 8, Chicago-based fund manager Anurag Singh of Ansid Capital tweeted a long thread on the Paytm IPO that quickly went viral. The first tweet said, “There is a new game in town. The rules are ‘well laid out’ by VCs,’ and over the next 20-odd tweets, he dissected the company’s business and revenue model.

Singh concluded, “Amazon and Flipkart inspire excellence. Paytm looks like a mediocre company dominated by giants.With dreams bigger than its financials, Paytm is asking for valuations at 65% of Axis Bank, 40% of HDFC Bank. If your mutual fund buys this IPO, stop that SIP.” Singh has now become a leading commentator on Paytm, sharing his views on business television and in newspapers.

And as the internet darlings like Zomato, Nykaa and Paytm listed, social media has become a battleground between proponents of old style investing and a new class of investors who believe that new loss-making internet companies can’t be valued using old metrics like price-to-earnings ratios or profit margin ratios.

“The old style investors missed the tech boom, the crypto boom, and the NFT boom. Some of these new companies, like Nykaa are choosing to invest in growth over profitability. They are launching new products, creating a bigger brand or strengthening their organisation. Of course, some of these startups are also clueless about profitability—that’s also a fact. But the good ones that might appear expensive will appear cheap 3–4 years later,“ says Bahal, who is also a well-followed influencer.

One of the most prolific tweeters on IPOs on Twitter has been 26-year-old Aditya Kondawar of JST Investments, whose followers have tripled to 62,000 followers since the IPO boom began a few months ago.

His elaborate posts on companies after reading a draft red herring prospectus (DRHP) and culling out relevant information have been very popular.