Thread by @ithoughtadviser

The IPO Hype!

A Thread.

#IPO #StockMarket #investing #strategy

1/11

IPOs have been all the rage this year. We’ve seen 98 IPOs from January 2021 till date. Are they worth this hype? Let’s take a closer look.

#IPO #IPOUpdate

2/11

Also known as ‘Going Public’. An IPO is when a company invites the public to invest in its shares. This is usually followed by a lot of fanfare.

#stocks #ipoallotment #markets

3/11

A lot of people invest in these IPOs hoping for ‘listing gains.’ It’s more akin to a short-term trade that could make significant returns. Do these actually work? Let’s look at some data.

#returns #investing

4/11

This chart shows the price movements from the issue for 98 IPOs this year. IPOs that have given negative returns are at 37%, taking the largest share in this data point. IPOs that have doubled take up 24%. But how do you figure out before the fact!?

#IPOUpdate

5/11

The investor’s objective of listing gains is defeated and they are stuck with a failed trade. Better be safe than sorry! Capital that could have been put to better use elsewhere. Especially with so many opportunities even in this market.

#StockMarket #opportunities

6/11

This chart shows the range most IPOs returned in the last nineteen years (marked area). The investor is taking a disproportionate amount of risk for the potential return. For comparison, the index has averaged a long-term return of 12%

#IPO #Risk #Return

7/11

This 12% return can be beaten with proper risk management and knowing where to invest when. This is where an advisor comes in. An IPO does not provide an opportunity for the required due diligence to be done to evaluate an investment idea.

#Investment

8/11

Most of us do not have enough data to make a fair investment decision until after a few quarters post listing. Furthermore, IPOs are very popular in frothy bull markets where euphoria is rampant and people can’t wait to see returns.

#IPO #Investment

9/11

The sellers in an IPO are big PE funds, Venture Capitalists and promotors who have close ties with the management. They have closely watched the company grow and after careful consideration have decided that the time to cash out is now.

#IPO #Funds

10/11

Think about it, do you know more than they do?

#IPO #IPOUpdate

11/11