Broker Check

IPO's

| July 08, 2019
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The dream of instant riches has enticed millions of investors to take a flyer on Initial Public Offerings (IPOs).  Everyone knows that early investors in Apple, Google, Microsoft and others have been richly rewarded.  But, unfortunately, for every one of those huge winners, there are hundreds of huge losers.  Professor Jay Ritter at the University of Florida calculated the returns from thousands of IPOs over their first 5 years of existence as public corporations.  He found that, 5 years after their IPO date, more than 60% were selling BELOW their first-day closing price, and more than 40% were selling at less than half their first-day closing price.  And the huge winners of stock market lore?  About 1.1% of the IPOs he studied were selling at levels 10 or more times above their first-day closing price. (Chart from cnbc.com)

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