Pre-IPO owners have 40% dividend yield??

This is an interesting observation and a unique angle to analyze dividend yields. Based on the most helpful WSO content, here are some insights and suggestions:

1. Understanding the Yield Discrepancy: The 40% yield for pre-IPO owners compared to the 1-3% yield for public investors post-IPO highlights the significant advantage of early ownership. Pre-IPO owners often acquire shares at a much lower cost basis (par value or close to it), so any dividends paid post-IPO represent a much higher yield relative to their initial investment. This is a reflection of the value creation during the IPO process and subsequent growth.

2. Usefulness of the Analysis: While this angle is not commonly discussed, it could be useful in understanding the incentives of pre-IPO owners and their potential behavior. For instance:

   • Retention of Ownership: High yields might incentivize pre-IPO owners to retain their shares longer, especially if the company maintains a strong dividend policy.
   • Dividend Policy Insights: It could shed light on how dividend policies are structured to benefit early investors versus public shareholders.

3. Extending the Analysis:

   • Compare Across Companies: Analyze the dividend yields of pre-IPO owners across multiple companies and industries to identify patterns or outliers.
   • Incorporate Buybacks: Since buybacks are an alternative to dividends, consider how they impact the total cash return to pre-IPO owners versus public shareholders.
   • Historical Trends: Look at how these yields have evolved over time, especially in different market conditions or regulatory environments.
   • Corporate Life Cycle: As noted in the WSO dataset, dividend policies often vary across a company's life cycle. Analyzing how pre-IPO yields change as companies mature could provide deeper insights.

4. Potential Limitations: Be cautious about the assumptions in your calculations, such as the accuracy of the par value and the consistency of dividend payments. Additionally, this analysis might not be directly actionable for public investors but could be valuable for understanding the broader dynamics of ownership and incentives.

If you're looking to refine this further, consider diving into industry-specific data or leveraging tools like Bloomberg's API to automate and expand your dataset. This could help you uncover more nuanced insights.

Sources: January 2016 Data Update 7: Dividends, Potential Dividends and Cash Balances, January 2016 Data Update 1: The US Equity Markets, https://www.wallstreetoasis.com/forum/investing/my-key-takeaways-from-the-introduction-of-the-intelligent-investor-part-116-to-be?customgpt=1, Private Equity: How to Analyze a CIM Effectively?, My Key Takeaways From the Introduction of the Intelligent Investor. Part 1/16. To Be Continued.