Key insights
- The article presents a bearish perspective on IPOs, suggesting they are primarily opportunities for insiders to sell shares rather than raise capital for growth. It argues that IPOs are often timed to coincide with market exuberance, potentially leading to overvaluation and subsequent underperformance. This viewpoint encourages investors to exercise caution and skepticism when evaluating IPOs, especially during volatile market conditions.
An experienced investor with 20+ years in the stock market said something interesting.
When a company goes public, that’s not a capitalization, as we are usually led to believe, that’s a sale. Someone wants you to buy their company, because they are selling it. And for that, they need buyers. To have buyers, the seller needs exuberance and an atmosphere that makes people believe the company is a good purchase.
If the company was so good and its shares were going to rise, do you think the seller would want to miss out on that increase?
In turbulent times like the present, this is something to keep very much in mind. An IPO is a sale. Someone wants to sell you something, and it’s not because they expect it to go up.
What do you think?