Due Diligence - How to Investigate a Stock Message Board

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Strategies & Market Trends : Due Diligence - How to Investigate a Stock

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To: ynot who wrote (60)	3/30/1999 4:19:00 PM
From: Zeev Hed	Read Replies (1) of 752

ynot, there is not fast rule in IPO's. One thing that helps determine what might happen is to see how much of the pre-ipo investors are taking out. An IPO is often an "Exit strategy" for the the various "angels" and VC investors that invested in the company prior to the IPO. If they unload a substantial part of their holdings (more than let say 30%) it means to me that they do not see the prospects as too bright. You must of course relate this to the valuation of the IPO itself. As for companies that change their business in mid stream, there is no reason to assume that a company that failed in one business (and thus changes to another) will be successful in the new business, on the contrary, this behavior is a "Charlie Brown" type of behavior (there is no problem so big one cannot run away from) and as a general rule rule, such a change is a good signal to get out. After all, the original investment in a company was because of the business they were supposed to be in, if they change, the original investment theme changed as well. Just my 2 cents. Zeev

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