Investors can withdraw money from IPOs

Friday, January 25, 2008

Investors can withdraw money from IPOs

After the ‘Sensex Zammen Par’ episode on black Monday, there is a ray of hope for retail investors, who have invested in the recent big ticket IPOs like Reliance Power and Future Group.

The finance minister and the Reserve Bank of India have assured the retail investors that they can withdraw from IPOs applied for anytime before the allotment of shares or securities by the company.

According to SEBI DIP guideline, an applicant can, in a book building issue, withdraw applications of a public issue anytime before allotment of shares. This rule emanates from the fundamental principle under the Law of Contracts that an offer can be revoked before acceptance.

The bids made by the bidders is an offer made and allotment of securities by the companies only brings into a binding contract between the bidder and company and, therefore, an application in a public issue can be withdrawn by the applicant depending upon the market scenario post subscription closure of the IPO but before allotment even if the application money has been realised by the company states the SEBI DIP guideline.

Instances have happened in the country where investors have withdrawn their applications in an IPO, like Purvankara group, Deccan Airlines, Cairn Energy, IVR Prime, KPR Mills and HDIL. - Bureau Report.

Now you know what happened here :)

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