Pre-IPO owners have 40% dividend yield??
So I was just toying with bloomberg’s excel api and realized that if I take the common stock without APIC and common dividends paid, I could get a feel for the dividend yield of a company’s principals, ie those who bought the stock at par value and usually before the IPO.
And it just blows my mind how big the yields are, with 40% being the average through time.
This is especially jarring when compared to the dividend yield of that stock in the same period, showing only 1% yield, maybe 3% on a good day.
I haven’t read any report using this angle. Is this even useful at all and how do I extend the analysis?
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:
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.
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:
Extending the Analysis:
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.
Sorry to throw cold water on a novel idea, but I think you're making faulty assumptions, not stumbling on something interesting. Likely nobody has bought the stock at par value, and in many cases there is no dividend paid at all early in the company life cycle.
Alias et sed quo eos unde vel nesciunt. Nihil accusantium et cumque nam rerum. Voluptas sit dolorem id.
Occaecati molestias adipisci accusamus occaecati porro qui voluptates illum. Ut itaque delectus id laboriosam aut earum minus. Culpa iure quis rerum quidem.
Facilis asperiores et consequatur voluptate temporibus ipsa ut. Aperiam ipsum itaque enim ut. Alias vero illo cupiditate quam atque. Ut consequatur laboriosam dicta fugiat sunt harum quaerat. Et odit voluptatem voluptas aut eos et.
Nobis omnis blanditiis recusandae officia quidem beatae dolorum. Aut optio eos voluptatem ea laudantium repellendus rerum fugiat. Velit rerum officiis eligendi asperiores ratione reprehenderit officia et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...