Investing in stocks is akin to investing in businesses, emphasizing the importance of holding onto one’s shareholding for as long as possible rather than engaging in frequent buying and selling.
This principle applies not only to secondary market investors but also to those participating in the primary market, particularly in Initial Public Offerings (IPOs). IPO investors are advised to hold onto their shares until the stock reaches its fair price.
To illustrate the potential benefits of long-term holdings in IPOs, let’s examine the case of Canarys Automations. The company’s IPO was launched in September 2023, with a price band of ₹29 to ₹31 per equity share. Listed on the NSE SME Emerge platform on October 11, 2023, the IPO had a strong debut, opening at ₹43.45 per share, delivering a 40 percent listing gain to investors.
However, the stock’s upward trajectory did not end there. On the listing date itself, it reached an intraday high of ₹44.90 per share. The bullish trend continued, and the stock touched a record high of ₹62 per share within just six months of listing, effectively doubling investors’ money.
In its latest development, Canarys Automations has announced plans to pursue an inorganic growth strategy by signing a non-binding agreement to acquire a controlling interest in a prominent software services and consulting company based in North America.
This strategic move marks the company’s first step into acquisitions, reflecting its commitment to achieving ambitious growth targets. By leveraging the strengths and expertise of both entities, Canarys aims to create synergies that drive innovation, enhance solutions and service delivery, and add value to customers. The transaction is subject to due diligence completion and the execution of definitive agreements.
To finance this acquisition, Canarys plans to utilize a combination of internal accruals and debt. The company intends to issue up to 25,60,973 convertible warrants priced at ₹41 each, with warrant holders having the option to convert them into one equity share at a premium of ₹39 per share within 18 months, aiming to raise funds of up to ₹10.49 crore. An Extraordinary General Meeting is scheduled for May 13, 2024, to secure shareholder approval for the proposed preferential issue.
In summary, the case of Canarys Automations demonstrates how holding onto IPO shares for the long term can yield substantial returns, especially when companies embark on strategic growth initiatives that enhance their market position and unlock new opportunities for expansion.
