Quotes About IPOs

IPOs.19 US E-commerce IPOs

There is no question that the losing IPOs far outnumber the winners. Of the 8,606 firms examined, the returns on 6,796 of these firms, or 79 percent, have subsequently underperformed the returns on a representative small stock index, and almost half the firms have underper-formed by more than 10 percent per year.

I examined the buy-and-hold returns of almost 9,000 IPOs issued between 1968 and 2001. I calculated the returns based on whether investors purchased the IPOs either at the end of the first month of trading or at the IPO offer price and held these stocks until December 31, 2003.25 There is no question that the losing IPOs far outnumber the winners.

Only a fraction of 1 percent of firms in the United States receive venture backing.[34] But in a study covering the quarter century from 1995 to 2019, Josh Lerner and Ramana Nanda find that VC-backed companies accounted for fully 47 percent of U.S. nonfinancial IPOs;

Thus, even though VC-backed firms accounted for 47 percent of IPOs, they accounted for 76 percent of the market value at the end of the study. They also accounted for fully 89 percent of R&D spending.[35

There is another unique aspect to thrift conversions. Unlike many IPOs, in which insiders who bought at very low prices sell some of their shares at the time of the offering, in a thrift conversion insiders virtually always buy shares alongside the public and at the same price.

Many Internet IPOs rose 1,000% or more in 1999 and early 2000; most of them lost more than 95% in the subsequent three years. How could these early gains earned by a few investors justify the massive destruction of wealth suffered by the millions who came later? Many IPOs were, in fact, deliberately underpriced to "manufacture" immediate gains that would attract more attention for the next offering.

More important, buying IPOs is a bad idea because it flagrantly violates one of Graham's most fundamental rules: No matter how many other people want to buy a stock, you should buy only if the stock is a cheap way to own a desirable business.

Finally, most of the high returns on IPOs are captured by members of an

You will never be allowed to buy the really good IPOs at the initial offering price. The hot IPOs are snapped up by the big institutional investors or the very best wealthy clients of the underwriting firm.

VCs like acquisitions as much as IPOs because the acquiring companies often can rationalize paying large multiples over the current valuation of the startup.

As a lawyer I did various IPOs and I know the power of our listing rules and the respect that has around the world.