The Great IPO Trap of 2025: Why 7 Out of 10 Recent IPOs Are Bleeding (And How to Avoid Being Next)

The Harsh Reality: When Grey Market Dreams Turned Into Listing Day Nightmares

November 2025 will go down as one of the most brutal months for retail IPO investors in India's history. Despite record-breaking subscription numbers, sky-high Grey Market Premiums, and enough media hype to rival a Bollywood blockbuster, 7 out of the 10 most retail-heavy subscribed IPOs have crashed on listing day—some sinking as much as 36% below their issue price.

If you're an investor who got caught in this bloodbath, you're not alone. And if you're planning to apply for upcoming IPOs, this article might just save you from becoming the next victim.

The Numbers Don't Lie: IPO Performance in 2025 vs 2024

Here's the uncomfortable truth that brokerages don't want you to see:

2024 IPO Performance:

Average listing day gains: 29%
IPOs closing with gains: 77%
Average oversubscription: Strong across segments

2025 IPO Performance (Till November):

Average listing day gains: 8.4% (down 71%)
IPOs closing with gains: 66% (down 11%)
IPOs closing with losses: 33% (up 10% from 2024)

Translation? The IPO party is over, and retail investors holding the bag are learning this lesson the hard way.

Case Study: When Groww's "Guaranteed" Listing Gains Vanished

Groww IPO (Billionbrains Garage Ventures) was supposed to be the golden ticket. Here's what happened:

The Hype:

Issue size: ₹6,632 crore
Subscription: Oversubscribed across all categories
Grey Market Premium: Positive throughout
Media buzz: "The Fintech IPO of the Decade"

The Reality:

Listed at ₹100 (just at issue price)
Surged 94% in 5 sessions to ₹193.91
Then collapsed 18% in just 2 days
Reason? Short squeeze, auction drama, and valuation concerns

The Lesson:

Even when an IPO seems "can't-miss," market mechanics, valuations, and post-listing dynamics can destroy your returns in hours.

The 7 Red Flags That Screamed "Don't Apply" (But Everyone Ignored)

1. Grey Market Premium Has Lost All Credibility

What used to work: GMP was a decent proxy for listing day performance.

What's happening now:

Tata Capital: GMP predicted 6-7% gain → Listed at 1.2%
NSDL: Strong GMP → Listed below expectations
Lenskart & Studds: Positive GMP → Listed below issue price

Why GMP is broken:

No institutional demand visibility
Leverage-driven HNI bids inflate numbers
Aggressive pricing leaves zero listing day upside
Grey market traders lack real market intelligence

2. Oversubscription Numbers Are Manipulated

The illusion: "200x subscribed! This will list at 50% premium!"

The reality:

Most HNI subscription comes from leverage
Banks offer 8-10x margin for IPO applications
Money exits immediately after listing (if listing happens at premium)
High subscription ≠ High listing gains

3. New-Age Tech IPOs Are Overpriced

November 2025 casualties:

PhysicsWallah: Down post-listing
Lenskart: Down 2.88% in single session
Pine Labs: Down 1.18%
Groww: Down 7.84% in one day after rally

Common thread: All were priced at peak valuations with little room for listing day premium.

4. Retail Investors Are Exit Liquidity

Here's the dirty secret of the IPO game:

Anchor investors (who get 30% allocation at a discount):

Lock-in period: Just 30-90 days
Can dump shares after lock-in
Already planning exits before listing

Promoters (via OFS):

Cashing out at peak valuations
No skin in the game post-IPO
You're buying what they're selling

5. FPIs Are Net Sellers (Except in IPOs)

Data from first half of November 2025:

FPIs sold $685 million from secondary markets
But invested $885 million in IPOs

Translation: Foreign money is coming ONLY for IPO allotments (where they get priority), then dumping listed shares. You're funding their exit.

6. Use of Proceeds Is a Red Flag

Good use of IPO money:

Business expansion
R&D and product development
Working capital for growth

Bad use of IPO money:

Debt repayment (company was overleveraged)
Pure OFS (promoters cashing out, zero growth capital)
"General corporate purposes" (translation: we have no plan)

7. Fundamentals Are Being Ignored

Valuation metrics investors are forgetting:

P/E ratios compared to listed peers
Revenue growth vs profitability
Cash burn rate for loss-making companies
Competitive moat and market share

Reality check: If a company is priced higher than its profitable, listed peers while still burning cash, you're paying for hope, not fundamentals.

How to Protect Yourself: The 5-Step IPO Evaluation Framework

Step 1: Ignore the Grey Market Completely

What to do instead:

Read the DRHP (Draft Red Herring Prospectus)
Check financials: Revenue, PAT, debt levels
Compare valuations with listed peers

Step 2: Check Who's Selling

Red flag: If 70%+ of the IPO is OFS (Offer for Sale), promoters are exiting. Why would you enter when they're leaving?

Green flag: Fresh issue for expansion with clear use of proceeds.

Step 3: Wait for Q1 Post-Listing Results

Pro strategy: Skip the IPO. Wait 2-3 months. Buy from the secondary market after:

Lock-in expiry dump
First earnings report
Valuation discovery

Example: Many 2024 IPOs that listed at premium are now trading below issue price. Patience pays.

Step 4: Apply Only at Cut-Off Price (If You Must Apply)

Why: Increases allotment chances in competitive IPOs.

But more importantly: If you're not confident enough to bid at cut-off, you shouldn't be applying at all.

Step 5: Set a Strict Loss-Exit Rule

The rule: If an IPO lists and falls 5-7% below issue price on Day 1, cut your losses immediately.

Why: Retail tendency is to "hold for long term" after listing loss. Data shows such stocks often fall further as reality sets in.

The Upcoming IPO Calendar: Which Ones to Watch (And Avoid)

High-Risk Zone (Proceed with Extreme Caution):

Jio Financial Services

Valuation: ₹9.3 trillion estimate
Risk: Extremely rich pricing for untested business model
Watch: Use of proceeds, competitive positioning

OYO IPO

Size: ₹8,430 crore
Risk: Hospitality sector cyclicality, past governance issues
Watch: Profitability metrics, debt levels

Potentially Safer Bets (But Still Do Your Homework):

Penna Cement

Size: ₹1,550 crore
Sector: Established industry
Check: Capacity utilization, regional competition

Skanray Technologies

Size: ₹400 crore
Sector: Medical devices (growing sector)
Check: Export exposure, regulatory approvals

Expert Insight: What Analysts Are Saying

Khushi Mistry, Research Analyst at Bonanza:

"This correction is a healthy reset, helping cool inflated expectations and shifting attention back to fundamentals such as profitability, margin expansion, and sustainable growth."

Key takeaway: The market is forcing a return to fundamentals. Companies without clear paths to profitability will continue to bleed.

The Uncomfortable Questions You Need to Ask

1. "But my broker said this IPO is a sure shot!"

Reality: Your broker earns commission on IPO applications. They're incentivized to get you to apply, not to protect your capital.

2. "The media is so bullish on this company!"

Reality: Media houses earn advertising revenue from IPO campaigns. Positive coverage often comes with corporate tie-ups.

3. "My friends made 50% gains on XYZ IPO last year!"

Reality: Survivorship bias. Nobody talks about the IPOs they lost money on. For every multi-bagger IPO, there are 5 that sink.

The Bottom Line: How to Win the IPO Game in 2025

The new rules are simple but hard to follow:

Rule 1: Most IPOs are priced to benefit sellers, not buyers

Accept this and you'll make better decisions

Rule 2: Grey Market Premium is noise, not signal

Focus on fundamentals, not speculation

Rule 3: FOMO is your enemy

The best IPO strategy might be to skip the IPO entirely

Rule 4: If you can't explain why an IPO is worth investing in without using the words "everyone is applying," don't apply

Your money, your rules

Rule 5: Remember that listing day gains are taxable as short-term capital gains

Even a 20% listing gain becomes 15% after tax

Conclusion: The Smarter Way Forward

The IPO market in 2025 has exposed an uncomfortable truth: retail investors are often the exit liquidity for smarter institutional money.

But here's the good news: armed with the right knowledge, you don't have to be a victim.

Skip the hype
Ignore the GMP
Read the prospectus
Compare valuations
Wait for price discovery post-listing

And most importantly, remember: Missing out on an IPO is better than losing money in one.

The market will always give you another chance to invest. Your capital, once lost, is much harder to recover.

Take Control of Your IPO Investment Strategy

Want to stay ahead of the IPO game?

Track live GMP updates (with a healthy dose of skepticism) on GAINIPO
Use our IPO Allotment Calculator to estimate your chances
Read detailed IPO analysis before every major listing

Because in the IPO market of 2025, information is your only edge.

Disclaimer: This article is for educational purposes only and not financial advice. Always consult a SEBI-registered financial advisor before making investment decisions.