Business Times Interviews - Starting Young

[kazukirai]

But then again, my personal tendency is to avoid IPO's. Cause they're kinda like start-ups / new companies to the listed world. Its hard to predict during the start / pre-IPO whether the company and its directors will be able to handle the pressures of being a listed company, with all the compliance issues as well as market pressure, etc.

My short answer is: As an investor, I would avoid IPOs too.

I read somewhere (I think it was in the edition of The Intelligent Investor with commentary by Jason Zweig) that IPO stands for It's Probably Overpriced and that I think is a pretty good way of remembering it.

All we have to do is ask ourselves this- "If we own a business, when do/should we sell whole/part of it? During good times or bad times?" I'm pretty sure all rational people will say "During good times." And prior to listing, the company seeking listing will have Investment Bankers and Consultants advising it on how to best present itself.

Therefore, my problem with IPOs is not so much that Management will fail in execution of current or related expansion but Valuation Risk- I don't see a high probability of buying the business or part of it at an attractive price when it IPOs.

People who are good at reading the madness of the crowds or have particular insight into the business and its industry will probably beg to differ though.