Listing gain is the percentage by which a stock’s price on listing day is higher than its IPO issue price. It is measured most often at the opening price, but can also be quoted at the day’s close. A stock issued at Rs 100 that opens at Rs 125 has a listing gain of 25 percent. A negative figure is a listing loss, sometimes called a discount listing. Listing gain depends on subscription levels, the market mood on listing day, the valuation, the news around the company and the grey market premium, although none of these is a reliable predictor. Many investors apply for IPOs mainly in the hope of a listing gain and sell on the first day, while others hold for the long term. Remember that the gain is only realised when you sell, and that trading costs and taxes apply. Short-term gains on listed shares sold within a year are taxed at the short-term capital gains rate in force, so check the current rate with a tax adviser. IPO Bulletin records the listing price and gain for each listed IPO, which is useful for judging how similar issues have performed historically.
Example: An IPO is priced at Rs 200 and opens at Rs 230 on listing day. The listing gain is (230 – 200) / 200 = 15 percent. If it closes at Rs 190, the closing day return is minus 5 percent.