Sunday, November 2, 2014

To IPO, or not to IPO: that is the question:

To IPO, or not to IPO: that is the question:

To be, or not to be: that is the question:
Whether 'tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles,
And by opposing end them?  (Shakespeare, 1602).

Hamlet was talking about the pain of life verses the uncertainty of death and damnation of suicide, and not Trading IPO’s, however I think the metaphor works somewhat.

I have only ever subscribed to an IPO once, and probably won’t do so again.  Risk/Return does not seem right. 

My recent reading highlighted the IPO’s of the Railway boom in 1845:

“If the subscription was successful, the committeemen retained a large allocation of stock for themselves and their friends and released only a few shares in the market, thus creating a scarcity which threatened to snare speculators who had sold shares short in anticipation of buying them back at a lower price.  The new railway company was then hyped by friends in the railway press and its stock bid up by agents in the stock market.  Once the shares were trading at a premium, the promoters would offload their retained shares at a vast profit.  Some companies even employed special “share committees” to oversee the success of those operations.”  (Chancellor, Devil Take the Hindmost, p130).

It all sounds quite familiar to TWTR and FB, and Alibaba.  Of course the banks these days are the “committeemen,” and their “friends” the Venture Capitalists perhaps.

I see some value in companies that have IPO’d and corrected into a nice long base perhaps in the months after IPO.  But they need some time for price and volume to become valid post IPO.  Before that, its ALL sentiment, usually too high a sentiment for investing in anything other than day trades.

There can be nothing worse than buying something when you only do so because everyone else already wants it, and it has been marketed to create that.

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