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Your Take: Do You Buy Into IPOs?

Posted By Jim On 12/09/2011 @ 7:15 am In Your Take | 8 Comments

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 [3] 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 [4] 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 [5]. Do you buy into IPOs?


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[3] $1 billion: http://www.bloomberg.com/news/2011-12-02/zynga-seeking-1-billion-in-biggest-internet-initial-offering-since-google.html

[4] Google: http://dealbook.nytimes.com/2009/08/19/googles-ipo-5-years-later/

[5] dividend stocks: http://www.bargaineering.com/articles/dividend-aristocrats.html

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