Many people are under the assumption that the market for IPOs has been terrible as of late. Following the disappointing Facebook [NASDAQ: FB] flop, investor confidence dropped dramatically. It’s no secret that the waters were already muddied by BATS Global and the like; however, who is really to blame for the travesty that is Facebook? Morgan Stanley? NASDAQ? Zuckerberg?
In the wake of Facebook’s complications, many investors have steered clear of the newly traded companies. But, I’m not so sure that’s a good idea. The most shocking thing is that IPOs have actually outperformed the S&P 500 so far this year, according to CNBC. So while the botched initial public offerings are the ones making the news, they aren’t necessarily the ones that are moving the market.
As you know, the average investor isn’t likely to get the big first day gains from an underpriced IPO. But that doesn’t mean that long holds won’t see returns as we’ve seen with LinkedIn [NYSE: LNKD] since it began being traded in May 2011.
A lot of attention has turned to Manchester United; a football club with a lot of debt and noteworthy competition on the field. It seems as if the only people willing to buy-in to this hoax are the loyal fans and utter morons. Man U shareholders won’t receive any dividends or voting rights – meaning the only reason for the club to go public is to pay off its $300MM in debt. Any safe investor should avoid Man U like the plague – however, if you’re looking for a speculation play, any success for the club on the field could result in tremendous gains.
What’s your take on the upcoming IPOs? Will they be gainers or will they flop?
Others scheduled: Delek Logistics Partnes, LP (DKL), Audeo Onocology, Inc. (AURX), JAVELIN Mortgage Investment Corp. (JMI)
Hope all of you do remember that an IPO is used to raise cash for the company. I consider an IPO a flop (from the company's perspective) if it gains double digit in the first day or so. Then they could have raised more money and only paid a small fraction more to the underwriters.
In many respects, Facebook was one of the greatest IPO's ever. Not only did they manage to get Facebook the highest valuation they may ever achieve, but they cashed out all the initial investors at the maximum value and got Facebook a massive cash cushion from which to run it's business. They took one of the most over hyped companies ever and ran with it. It all depends on your perspective in this. If you were an institution that took down a huge allocation you got screwed, but that's really your fault for buying into something that everyone knew was going to command an massive premium to it's true value (whatever in the world that is).
I have argued this exact point to people who argue that Morgan Stanley did a bad job on the IPO. If anything, they did exactly what they are supposed to do - raise as much money as possible for the company. They didn't put a gun to anyone's head to invest in it.
It's not Morgan Stanley's job to make sure that there is a first day pop, or a first month pop. The job is to raise as much capital as possible for the company's operations.
The best was that someone argued back that, and I quote, "the market should have determined the price," uh, that's what the fucking road show is for.
It'd be like someone going to sell their company, and asking that the investment banker doesn't aim for the highest price, but the "fairest" price. Whatever that means.
I agree with both of you. Morgan Stanley did a great job for the firm and Facebook as a comapny. I was thinking more along the lines of the average investors who bought shares at ~$30 and haven't seen anything yet.
I understand where your coming from, and it sucks for average investors who bought in at those prices. That said, by the time Facebook was around 30 dollars the warnings signs were literally on the front page of every newspaper you can find. Growth Slowing. Over-hyped, value trap, blah blah blah. If you couldn't see at that point that anyone buying Facebook was investing on hope and faith alone, well, I can't help you. It's inevitable when you attempt to catch a falling knife your going to get it through the hand more often than not. Just the way it is.
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