How Lottery Thinking Hijacked Investing!

Keywords: IPO: Initial Public Offering, NEPSE: Nepal Stock Exchange, BFIs: Bank and Financial Institutes.

In the Nepalese capital market, IPOs have turned into a public spectacle (Paryo ki parena? is slowly becoming a new magical three words). New investors subscribe blindly around 22–25 times. People line up for hours, if not days, in the streets of Delhi Bazar just to open a demat account. The moment an IPO is allotted, the drum and pain are all good.

The expectation is simple: it will skyrocket on listing, and you’ll get rich.
There are even market anecdotes that when an IPO-listed company starts trading on NEPSE (Nepal Stock Exchange), mobile phone sales rise in the Terai — because many investors sell their shares on listing day, take the cash, and exit the market. The common market language: IPOs are treated as a lottery. To most participants, this is not investing — it is a process.
But this visible market pattern raises uncomfortable yet basic questions that people are unaware of:

1. Why do companies go public?
Is it a myth that only loss-bearing companies go public? (The basic)
2. Why does an IPO feel like a sure win in Nepal? (The risk factor)
3. Why are people selling at the first trading just to apply for another?
(Demand & obsession)

People in the capital market have a huge knowledge difference.
Those who dive directly into the market — people are impatient and greedy, which is mostly true, but it doesn’t define the whole scenario. The reality is: the market itself is structured in a way that discourages research and patience. When the system rewards shortcuts, people naturally take them.

According to Madan Paudyal, Managing Director of NAASA Securities, the firm has over 550,000 trading accounts, and a large portion of them exist for one purpose only: to fill and sell IPOs.

Think about the structure:

You apply for 10 kitta
Investment amount: Rs. 1,000
Listing price historically trades far above the issue price
Exit is immediate and effortless

In such a setup, who wants to read the prospectus?
Who checks credit ratings?
Who waits?

The capital market plays with human emotion.
The urge to make more—quickly—overpowers discipline. Many call it greed, but it is more accurately incentive-driven behavior. When effort is not rewarded and shortcuts are, knowledge becomes optional.

A capital market without knowledge is gambling. When participation is driven by emotion, identity, and urgency rather than understanding, the market stops being a place of capital formation and becomes a betting ground.

This article is not written as advice.
It is research for me—an attempt to understand behavior that has become normalized. If it helps others reflect on their own participation, that is a byproduct, not the goal. It is also an attempt to provide people with some knowledge about the topic.

To make sense of the IPO phenomenon, the discussion needs structure.
The core questions connect through three layers:

The Basics → The Risk Factor → The Demand

A company goes public not because it suddenly discovers ethics or wants retail investors to get rich, but because it wants cheap money, legitimacy, and liquidity at the same time. There are a couple of ways a company can raise money either by selling its ownership or by taking money from banks. By listing on the Nepal Stock Exchange, a company raises capital without borrowing, promoters get a market price for what was earlier just paper wealth, and the firm earns the prestigious label of being “listed,” which sounds impressive even when the balance sheet is just decent. Loans, on the other hand, come with interest payments, changing interest rates, compliance headaches, and banks breathing down your neck—too much discipline for comfort. Selling shares is easier: no interest to pay, no fixed repayment, and dividends are optional, not compulsory. Shareholders are owners, not lenders; they get paid only if the company performs, and if it fails, all liabilities are settled first and whatever is left at the end is divided among them. That leftover amount, the last man standing money, is what investors politely call book value.

Can loss making company go public?

YES. Does loss-making only issue IPO? NO, the company with consistent profit can issue IPO's. Also in premium price.

The Risk Factor: The Risk Factor here has no Factor of Risk.

In Nepal, an IPO feels like a sure win, not because companies suddenly become extraordinary, but because the market is built to make it look that way. Call it a lottery—no blame on people. When an IPO is listed on the Nepal Stock Exchange, demand floods in from everywhere, but supply quietly disappears. On paper, around 40% of shares are called “public,” but most of those shares are locked. Mutual funds, BFI’s, employees, locals—everyone gets a piece, but they are told, “You can’t sell yet.” So, on listing day, only about 20% of the total shares are available in the market.

Think of it like this: Imagine a Momo stall where 100 plates exist, but 80 plates are already booked and can’t be sold today. Now 1,000 hungry people show up, and the stall owner says only 20 plates are available. What happens next doesn’t require an MBA. People start offering more, prices go up, and suddenly Momo feels expensive. That’s exactly what happens with IPOs. Too many buyers, too few shares. Prices jump—not because the company is great, but because the shortage is real. When people chase what barely exists, they will pay for anything. That’s why IPOs feel risk-free. Not intelligent investing—just basic demand, low supply, and a market that quietly encourages it.

These days, many naïve investors are jumping into the market with barely any knowledge, without realizing how deep the fall can be on the other side. Based knowledge should come first—always. I’m not saying you shouldn’t apply for IPOs; in fact, apply to every IPO that comes your way (at least I will, except mutual fund IPOs). But applying blindly is not the same as understanding what you own. You should at least know how to judge a company, read fundamentals, look at ratios, and understand what you’re buying. And if shares do get allotted, at least know when to sell instead of panic-selling on listing day like it’s a ritual. Because while many are rushing to exit on day one, knowledgeable investors are quietly buying from them—yes, especially from the famous “10-kitte” crowd. IPOs can give you easy money, no doubt. The smart move is to use that easy money to buy knowledge, not just another quick trade. Because in the end, money doesn’t magically multiply, informed money makes money.

References

New Biz Report, 2026. Private Power Boom, s.l.: New Biz Report.

Paudyal, M., 2026. What's With Wolves of Nepse [Interview] (Jan 2026).

Pokheral, D., 2025. Myrepublica. [Online]
Available at: https://myrepublica.nagariknetwork.com/news/new-ipo-regulation-and-concerns-of-hydropower-sector-79-14.html
[Accessed 12 Jan 2026].