What stocks should we buy during IPO and what stocks should we buy only after IPO?

Hi,

I have been debating this question in my mind for a while. During my classes, I have learnt that during "eurpohic" times, many firms (especially start ups) are normally pushed by their backers, PE venture capitalist firms, to be IPOed so that these PE venture firms can cash out at high valuations. In addition, it is common for firms to IPO during good times so as to achieve higher valuation.

Lastly, I have seen many stock prices fall below that of their IPO prices with the exception of a few good companies like the mapletree coys who are trading above their IPO price. So hence my question is this : What are the kind of stocks should we buy during IPO balloting and what are the kind of stocks we should buy only after a period of its IPO?

This is so that retail investors will achieve a reasonable value for a share of the company we are buying into.

I would like to hear your views. Thanks

Frankly if you are true blue value investor, its best to avoid IPOs. Even if they are good companies, they will be expensive for the reasons u mentioned.

Thats my 2c.

if u are looking to buy and stag, then the main thing is just investors' sentiments (i.e. is the market insane enough for there to be enough people to buy on the open from you). In a market insane enough, just about any stock can be profitable to stag. In the early 2000s (anyone remember the epublicoffer.com?), just about any IPO was profitable - quite a few of these turned out to be the infamous china chips when dirt hits the fan e.g. celestial, new lakeside etc

in general i find the stag method fairly neutral in the long run if you don't do sufficient analysis. A good chip should ensure that u get little on allocation so generating a small +ve; a bad chip should ensure u get the full size on allocation so generating a big -ve. net expectations are rather flat - if u treat the stag game as a bet.

if u are looking to buy into the company for the long run, then whether it is an IPO or not doesn't matter - my golden 5 questions are
1) why is the founder listing the firm?
2) do i understand the business
3) is the business enduring
4) is the management honest?
5) is the price right?

the good thing about an IPO is that it might offer me a very good price for entry so i ballot for them just to gain a cheap entry when convinced, and might add on when new numbers reveal themselves.

the bad thing about an IPO is that normally there's a lack of historical data, so points 4 and 5 are hard to analyse.

so in short, i treat IPOs as interesting case studies to analyse a business and if the numbers make sense then i use the ballot as a cheap entry, and then add on when further numbers reveal themselves.

IPO placement agents have access to 2 years forcasted statement of the new Listco. Thus, initial valuation can be evaluated. That may also explain why some stocks are a STAG, while few high flyers move higher than IPO price. The forecast report is not disclosed to retail investors.

Valuable information on the company future growth can still be extracted from the prospectus. It takes some experience for retail investors to identify the key growth factors.

Experience curve matters in intrepretation of the information in prospectus. Dont give up, just keep reading every prospectus

(07-03-2013, 06:20 PM)AlphaQuant Wrote: if u are looking to buy and stag, then the main thing is just investors' sentiments (i.e. is the market insane enough for there to be enough people to buy on the open from you). In a market insane enough, just about any stock can be profitable to stag. In the early 2000s (anyone remember the epublicoffer.com?), just about any IPO was profitable - quite a few of these turned out to be the infamous china chips when dirt hits the fan e.g. celestial, new lakeside etc

in general i find the stag method fairly neutral in the long run if you don't do sufficient analysis. A good chip should ensure that u get little on allocation so generating a small +ve; a bad chip should ensure u get the full size on allocation so generating a big -ve. net expectations are rather flat - if u treat the stag game as a bet.

if u are looking to buy into the company for the long run, then whether it is an IPO or not doesn't matter - my golden 5 questions are
1) why is the founder listing the firm?
2) do i understand the business
3) is the business enduring
4) is the management honest?
5) is the price right?

the good thing about an IPO is that it might offer me a very good price for entry so i ballot for them just to gain a cheap entry when convinced, and might add on when new numbers reveal themselves.

the bad thing about an IPO is that normally there's a lack of historical data, so points 4 and 5 are hard to analyse.

so in short, i treat IPOs as interesting case studies to analyse a business and if the numbers make sense then i use the ballot as a cheap entry, and then add on when further numbers reveal themselves.

Thanks for all the views, it seems some will advise avoiding IPOs because of the possibly of being pushed to be profitted whereas others view some IPOs as IPOs priced to sell with attractive growth prospect if digging of the prospectus is done carefully

Hope to hear more opnions

Alternatively, get a stockbroker whom read IPO prospectus regularly (Probably 1 out of 100), he/she shall be able to summarise for you the key points.

(08-03-2013, 08:56 PM)CY09 Wrote: Thanks for all the views, it seems some will advise avoiding IPOs because of the possibly of being pushed to be profitted whereas others view some IPOs as IPOs priced to sell with attractive growth prospect if digging of the prospectus is done carefully

Hope to hear more opnions