Rupert--
Just came across your thread here. Your thesis as I understand it is that the IPOs that get media attention tend to go up too much, while there are some other fundamentally sound, quality companies that are neglected, and that therefore could be good investments shortly after they come public.
I am skeptical that this strategy will work. If you can point to a record of success, great. But the real determinant of the first day performance is how the underwriters did and the company did during the institutional road show and the related marketing. It would be pretty unusual for a major underwriter to fail to tell the story, so that the stock lagged initially, only to be "discovered" and bid up by investors later. And if the underwriter were incompetent or so small that it could not reach investors, then one has to wonder how the issuer could have been so ill-informed as to pick them for the underwriter.
If you want neglected but high quality stocks, it seems to me that the LAST place you want to look is under the IPO spotlight. Instead, focus on the small cap sector and dig around for neglected issues.
I did like your notion that a big high visibility offering can tend to pull attention away from other deals that come out the same day, causing them to be weaker than they otherwise would be. Have you seen any analysis of this, or is it just based on your observation of a few cases?
TOA |
