Importance of Distribution and Institutional Entry in IPOs

During periods when participation in IPOs reaches record levels in Borsa Istanbul, one of the issues investors are most curious about is distribution ratios and institutional participation details. In the IPO process of a company, the ratio of the collected demand to be distributed to which investor groups is pre-determined in the prospectus. Usually, this distribution is divided into three main groups: 'Retail Investors', 'Domestic Institutional Investors', and 'Foreign Institutional Investors'. Distribution ratios and the entry of institutional investors directly affect the board performance of the stock after it starts trading.

Equal distributions made to retail investors are extremely important for expanding the stock market base and protecting small investors. In equal distribution, the IPO size is divided by the number of applicants, and everyone is given the same amount of lots. This prevents large capital holders from monopolizing the board. However, since retail investors usually act with short-term profit goals, they may make quick sales after the stock starts trading on the exchange. Therefore, in stocks with a very high retail distribution ratio, the preservation of ceiling series depends on the selling discipline of the investors.

The share quantity received by Domestic and Foreign Institutional Investors from the IPO and the identities of these institutions are also of critical importance. Institutional investors (funds, portfolio management companies, pension funds) usually act with a long-term investment perspective and do not sell their shares easily. Allocating a large part of the IPO to institutional investors and these institutions owning the shares provides stability on the board after they start trading. In addition, high foreign institutional participation creates a very positive effect on the price as it shows global confidence in the company.

Investors should examine the distribution reports of brokerage houses in detail when IPO results are announced. Seeing which institutional fund received how much share provides clues about the future board structure of the stock. For example, commitments given by institutional investors not to sell their shares for a specific period (e.g., 30 days or 6 months) under commitments (lock-up period) prevent selling pressure on the stock. Likewise, commitments of company partners not to sell shares and price stability operations increase the security of the stock.

On our Sermaye Borsasi Telegram channel and depth bot, we analyze IPO results with charts the second they are published, sharing institutional distribution details and the list of fund holders. We present to our members instantly which institutional fund submitted how much demand to which IPO. Investing consciously in IPOs is not just looking at the lot size, but understanding this institutional ownership behind the company. As Sermaye Borsasi, we always support transparent and in-depth analysis.