Profitability is hip again!
If you are curious why IPOs are a bad idea for retail investors, here’s a TLDR:
- There’s information asymmetry. Company insiders who are selling know a lot more than retail investors.
Consider IPO as legal insider trading.
- There’s information asymmetry. Company insiders who are selling know a lot more than retail investors.
Consider IPO as legal insider trading.
- Bankers who under write IPOs have maximum incentive to drive down the IPO price (at which they purchase shares from company) so that they can make a profit on day 1 by selling them to retail
Read this medium.com/swlh/a-success…
Read this medium.com/swlh/a-success…
- So given that fee selling parties have more info about business than a retail investors and they have maximum incentive to paint a rosy picture, this almost always means that IPO prices usually crash in first year
Evidence shows this clearly: evidenceinvestor.com/ipo-stocks-wor…
Evidence shows this clearly: evidenceinvestor.com/ipo-stocks-wor…
Net-net: stay away from IPOs, let market discover the true price of a stock after 12-24 months (by then insider incentives for selling have played out fully)
Remember: in normal stock trading, two equally clueless people buy/sell stocks.
In IPOs, the seller is much more informed than the buyer.
In IPOs, the seller is much more informed than the buyer.
