Investing in IPOs?
A question from Yahoo! Answers:
Investing in newly floated companies?
Just a thought…. I guess new companies floating on the stock market make an interesting investment. High risk and possibly great gain??. Does anyone have any opinions on this? How can you find out about new floatation? Does anyone know how many occur in a typical year?
Companies issuing stock during 1970-1990, whether in an initial public offering (IPO) or a seasoned equity offering (SEO), have been poor long run investments for investors.
During the five years after the issue, investors have received average returns of only 5% per year for companies going public and only 7% per year for companies conducting an SEO.
Book to market effects account for only a modest portion of the low returns. An investor would have had to invest 44% more money in the issuers than in non-issuers of the same size to have the same wealth five years after the offering date.
Source:
Loughran, Tim, and Jay R. Ritter, 1995, “The new issues puzzle,” Journal of Finance 50, 23-51.
http://www.myvirtualdisplay.com/2007/01/17/investing-in-ipos/
Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Saturday 9 May 2009
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