IPO Strategies: Example US IPO Market January to November 2013

This data was compiled from 193 US IPOs in 2013.

This graph shows how the risk of losses rises for a strategy of buying IPOs on the close of the first day of trading and holding them (green, let’s call it ‘Strategy B’). It also shows how being allocated shares in new issues prior to trading and selling on market close of the first trading day is a much lower risk strategy (blue, let’s call it ‘Strategy A’) for several reasons: a) your capital is only tied up for 1 day – 10 days (depending on if your bank needs cash on an account for the whole potentially allocatable USD amount) b) you profit from bookrunners generally underpricing new issues. Strategy B let’s you invest at what the market thinks is fair value, which of course offers less upside.

Note how the regression line of Strategy A is constantly and clearly in the 15-25% return range. That’s in stark contrast to Strategy B which has a downward sloping regression line that is close to 0% in the last 2 months (left=November, right=January). As this year has been a bull market the IPOs from January through April have risen in line with the market.

US_IPO_Market_1st_Day_Close_vs_Current_1

Also see yesterday’s post for more graphs.

Should you be interested in benefiting from the possibilities in the worldwide IPO market, feel free to contact me via the website contact form or facsimile. Should you need assistance opening a swiss bank account, I will also gladly help you.

 

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