Investor Corner/The asset classes/Equity Concepts
2.1.15 IPO (Initial Public Offering)
An IPO is the first time a private company sells shares to the public. It can be an exciting entry point into a growing business, but the evidence shows many IPOs underperform in the months and years after listing.
What actually happens in an IPO
Before an IPO, a company is owned privately, often by founders, employees and early investors. The IPO process converts a portion of that private ownership into publicly traded shares, raising fresh capital for the company and giving early investors a way to sell their stake. The listing typically generates significant public attention, which is part of why demand can run well ahead of the company's actual fundamentals.
Why many IPOs disappoint afterward
Companies and their bankers generally aim to price an IPO to generate strong initial demand, which can leave less room for further gains once the shares start trading freely. Combined with the fact that a young public company often lacks the multi-year track record available for an established listed business, this is why data across many markets and years shows the average IPO underperforming the broader market over the following one to three years.
A more patient approach
There is nothing wrong with eventually owning a good company that once had an IPO. The more reliable approach is usually to wait for a genuine track record as a public company, several quarters or years of actual results, rather than buying purely on listing-day excitement.
How PriLytics helps. Whatever you decide about individual stocks, PriLytics keeps your whole portfolio, funds, deposits, gold and more, in one consolidated view so no single decision is made in isolation. See your whole portfolio.