Why Do IPO Stocks Experience Limit-Up/Ceiling Series?

One of the most important events that frequently occurs in Borsa Istanbul, especially in recently IPO'd stocks, and attracts the attention of investors is the 'ceiling series' situation. A ceiling series is when a stock rises by the daily maximum limit of +10% and closes at the ceiling price for days in a row after it starts trading on the exchange. This situation stems from the demand for the stock being many times greater than the supply. Investors create intense buying demand, thinking that the IPO price is cheap compared to the company's real value, and the absence of sellers on the board leads to the price locking at the ceiling level.

The most basic mechanism behind ceiling series is the quantity of 'pending orders'. When a stock reaches the ceiling price, the orders of investors who want to buy at that price but cannot find shares accumulate at the bid level. For example, if there are 10 million lots of buyers waiting at the ceiling of an IPO stock, this shows that the probability of the stock opening at the ceiling the next day is extremely high. Because sellers in the market do not want to sell a stock with so many buyers waiting at its ceiling, and this allows the price to continue its rise. As the quantity of pending orders decreases, the risk of the ceiling series breaking increases.

The breaking of the ceiling series occurs when the demand of the buyers on the board is met and sellers become dominant. Generally, profit-taking by institutional investors or retail investors cancelling their orders in panic leads to the breaking of the ceiling. When the ceiling breaks, the price usually pulls back rapidly and high volatility occurs. Investors who cannot monitor depth data instantly during this period may lose money by buying at the peak point. Therefore, instead of queuing to buy in stocks making a ceiling series, it is healthier to analyze the volume at the moments when the series breaks.

The duration of the ceiling series of IPO companies varies according to the size of the company, the IPO ratio, and the general mood in the market. Small-scale companies with low public float ratios can generally make longer ceiling series (e.g., 8-10 days) since there are fewer lots in the market. In the IPOs of huge conglomerates or industrial companies, ceiling series are usually shorter (e.g., 2-3 days) because there will be too many lots in the market. Examining these lot quantities from the prospectus helps investors determine their strategies.

On our Sermaye Borsasi Telegram channel and depth bot, we share the instant lot quantities pending at the ceilings of IPO stocks, transaction volumes, and brokerage house distributions instantly during the session. We report to our members in seconds which stock shows a ceiling-breaking signal and in which stock buyers continue to remain strong. Monitoring instant depth data is of vital importance to maximize your gains and protect against risks in IPOs. As Sermaye Borsasi, we recommend that you always make data-driven follow-ups.