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Your Take: Do You Buy Into IPOs?

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There have been a lot of technology initial public offerings (IPO) this year and they’ve gotten a ton of press. It reminds me of the tech bubble over a decade ago when anything with a .com could IPO and skyrocket in the first day. This year we’ve seen plenty from LinkedIn to Pandora to Groupon and while the first day’s gains were pretty big, subsequent days saw the price fall. The latest hot technology stock IPO to get press is social gaming giant Zynga with their plan to raise as much as $1 billion in an IPO. The plan is to offer 100 million shares at $8.50 to $10, which values the company at around $7 billion. All of those deals would pale in comparison to the looming Facebook IPO.

I’ve never invested in an IPO on that first day (or first month…) and I doubt I ever will. I always see this as gambling because for every skyrocketing day-1 stock there is a ho-hum lackluster day-1 stock. Very rarely do you see a situation like Google where you have IPO at $85, it has a huge pop the first few days and is worth over $600 just a few years later. Just look at Pandora and Groupon today, just a short time after their IPO, and you can see how just holding onto it a little longer could take gains and turn them into losses. Would you take the day-1 gains and be happy? Or would you hold (and guess) hoping for a Google story? That’s why I don’t take part, I’m a bad gambler and an even worse guesser. :)

I’ll stick with my boring dividend stocks. Do you buy into IPOs?

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8 Responses to “Your Take: Do You Buy Into IPOs?”

  1. Big Spender says:

    It depends on the initial float. If a majority of all the shares are put on the market on day one, then you have a good real-world valuation to play with.

    On the other side you have Groupon, which can flood the market at any time with the 90% of its shares that still are in private hands. That’s not a good situation for anyone who buys overpriced shares on day one.

  2. Casey says:

    The only IPO I’ve ever participated in was Visa. It’s worth 160% of my inital investment now, so my only regret is that I didn’t have more liquid assets that I could afford to risk at the time. And they pay a dividend!

  3. Jonathan says:

    IPO’s are always a risk and I suppose it depends upon the type of exposure that you are willing to permit. For me I look for less risky stocks

  4. Vic says:

    IPO’s are a suckers bet 9 out of 10 times. Unless you have a warchest, you wont get first crack at the IPO and hence not get at the ‘ground level’ for a public investor.

    Wait for the dust the settle and look at the financials. If the numbers don’t add up, don’t jump in

  5. Strebkr says:

    Its all about the amount of risk in a company and the amount of hype surrounding it.

  6. I haven’t seen recent statistics on this since the IPO market has been ho-hum for a long while, but as a rule, most IPOs significantly under-perform the broader markets over the first three years of trading. As a result, they are seldom a good long-term investment. Sure, if you have a hot issue, you might make some quick cash, but that requires good selection and even better timing – rare qualities to be sure.

  7. Scott says:

    I had a chance to get in VG… I read their docs and decided not to due to their not making any profit and how much was spent on advertising plus anyone could do this… Opened at $17…now $2.39…


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