A sharp warning has emerged from the financial world as Vikas Khemani, founder and CIO of Carnelian Asset Management, flagged serious concerns over the quality of companies preparing to go public. After reviewing the current IPO pipeline with several investment bankers, Khemani concluded that a significant majority of upcoming listings lack strong fundamentals. His assessment points to a challenging landscape where many IPO-bound companies may struggle to justify their valuation expectations once listed. The remarks have ignited fresh debate over the health and credibility of the ongoing IPO frenzy.
Khemani revealed that out of the numerous companies gearing up for public offerings, his firm declined to even meet 95% of them due to weak business prospects. The remaining 5%, which were evaluated, also failed to demonstrate an attractive balance of fair pricing and robust fundamentals. According to him, nothing in the pipeline stood out as a genuinely compelling investment opportunity. This reflects a growing disconnect between the valuations companies seek and the actual quality of their business models, raising concerns for both institutional and retail investors.
What makes his warning more striking is the clarity with which he assessed business quality across the board. Khemani noted that nearly 80% of the companies demonstrated poor fundamentals, and many may eventually trade at only 50–60% of their IPO price. This indicates a real possibility of substantial erosion in investor wealth after listing. His cautionary note serves as an important reminder that listing euphoria should not overshadow thorough analysis, especially when markets are experiencing heightened activity and optimism.
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Despite the severity of his critique, Khemani emphasized that he is not dismissing the IPO market altogether. He stated that his firm welcomes companies going public and thoroughly evaluates genuine opportunities. However, he stressed that the broader trend is concerning, urging investors to slow down, scrutinize more carefully, and avoid being swayed by market momentum. His commentary highlights the pressing need for rational decision-making rather than emotional, hype-driven participation in public offerings.
Khemani also issued a direct appeal to institutional investors, calling on them to raise their standards and apply stricter screening criteria. He believes that higher diligence from institutional participants can significantly improve the quality of companies entering the market. His message underscores the influential role that fund houses and investment institutions play in shaping the credibility and health of the capital-raising environment. Strengthening governance and evaluation practices could help create a more stable IPO ecosystem.
His remarks triggered a flurry of responses online, with many users questioning why institutional investors continue subscribing to overpriced IPOs despite widely acknowledged weaknesses. Some pointed out that many companies use IPOs merely as an exit route for promoters and early investors rather than for genuine business expansion. Others cautioned retail investors not to view IPOs as guaranteed profits, warning that lax standards could lead to long-term disappointment. Ultimately, Khemani’s message resonates as a powerful reminder: prudent research and realistic valuation assessments are essential before participating in any public offering.
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