Noreen thanks for the great article quantifying the risks of IPOs. I think that the media and enthusiasm get the best of so many of these investors that they don’t stop and think logically. The social media IPOs will be the next bubble I am certain and many unfortunately will get burned. I also do not have the appetite to play the IPO game because I think the pricing is never in line with the reality of the market value of the stock, its only in line with the buzz.
Twitter worth $7B?
tokyogai
7/6/2011 12:59:12 PM
Now I see Twitter wants to raise some funds with a valuation of over $7B. Where does that come from? They have little revenue, they have not yet figured out a business model and they really have nothing going for them but a lot of free users. I don't think this company is worth what has been invested so far, much less $7B.
Re: It's a gamble
Broadway
7/5/2011 10:00:32 PM
Not so sure it's a good thing to encourage anyone to be throwing money at some of these recent IPOs. What's the short to midterm risk of these unprofitable and inflated IPOs to the overall market (and investors who wisely sit on their sidelines)?
Re: It's a gamble
mInvestor
7/5/2011 2:21:14 PM
Negative profitability, future growth... That's pretty common to most recent IPOs. Cautious！
Re: Re : IPO Fever Is Highly Contagious, Hard to Justify
mInvestor
7/5/2011 2:17:02 PM
Thank Scott, that's really a good summary.
Maybe I shall following this strategy since I am considering LinkedIn. 6 to 12 months, hm?
mInvestor
It's a gamble
AskAsa
7/5/2011 1:39:20 PM
Seven years ago, I was doing some post dot-com boom IPO research. I found a report by Liz Demers, a professor at business school Insead in France, that made sense to me then and continues to resonate, She said:
“Firms are going public now that are riskier than they used to be in the past. They are exhibiting lower levels of profitability and often negative profitability when they go public and that was much less common in past decades. Much of their value resides in future growth prospects rather than past realizations of success, so the characteristics of the firms that are going to public markets and the willingness of shareholders in the public markets to fund those types of firms have really changed over the decades."
Re: Thinking about this
driven
7/5/2011 1:27:50 PM
Names in the news, maybe. But good names to invest in? Not so sure. And good to invest in during an IPO? Uh, no.
Re: Thinking about this
Tenacious
7/5/2011 1:19:41 PM
Drought on the Farm?
Tenacious
7/5/2011 1:18:51 PM
ZDNet warned today that investors will have to be willing to take some slightly unusual risks if they put money in Zynga because of its over reliance on Facebook and the fact it relies on a small number of players for almost all its profits.
*Renaissance Capital predicts the IPO market will see a resurgence in activity through the end of the year, with high-profile names like Groupon, Zynga, and LivingSocial, old-line companies including Dunkin' Brands and Toys R Us, and global leaders such as Spanish savings bank Bankia, New China Life, and Repsol Brasil all preparing to go public.*
It looks as though it is time to start investing that hard-earned cash in some of these IPO's. Thats a good crop to choose from...groupon and Zynga are extremely popular with the youth, and old staples like Dunkin ' Brands and ToyRUs can go a long way in solidfying your accounts.
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