It’s been very hard in recent years to make a profit from IPOs.
At least in the short term.
When I started investing in the 1990s, ‘stagging’ an IPO was often a sure-fire bet.
Huntly power station. Many Kiwis became part-owners when Genesis Energy went for IPO in 2014.
Some ‘stagged’ the offer, banking profits. Source: Bgabel / Wikimedia Commons
Here in New Zealand, when the gentailers went private in the 2010s, many sold shortly after participating. For example, Genesis Energy [NZX:GNE] IPO’d at $1.80. The offer was oversubscribed. By early 2015, the stock had reached $2.34 — a 30% gain in less than a year. Just for filling out a form and putting down some cash.
Today, Genesis stock sits only around $2.53. Though it has paid strong dividends over the years and still projects a yield of over 5.6%.
For US unicorns, it’s been more difficult to access IPOs
On 10 December 2020, Airbnb [NASDAQ:ABNB] was initially priced at US$68 per share.
The offer was essentially only available to a limited number of Wall Street institutional investors and a handful of existing Airbnb hosts who managed to jump on the email offer that morning. By the time the stock began trading, it had opened at $146 per share. Today, it sits at around $137.
On 10 May 2019, Uber [NYSE:UBER] IPO’d at $45. Within a few months, it was down below $30. Though the sales growth of the business has rewarded patient capital. There were many opportunities to buy below $30. Today, it sits at around $73.
Over the years, I’ve received a few calls from clients telling me they’ve seen a special offer to participate in the IPOs of more hot US companies. These offers are usually a scam. IPOs are either launched to the public directly — or they’re closed off, with institutional investors only snapping up the initial offer.
Well, there’s a new way IPOs are being done these days.
It presents risk. But in the case of the next phase of US unicorns, it also presents opportunity…
Your first Quantum Wealth Report is waiting for you:
