Are IPOs good long term investments?
IPOs can deliver good short term returns for investors, even if it may not be as impressive as headlines suggest. In our last report on short term IPO performance, it was shown that average first day returns from participating in IPOs were high. After making a few adjustments the story didn’t look quite as good, but the returns were still positive.
The longer term performance of IPOs is a completely different story. The process of taking a company public typically involves some very well informed private sellers looking to raise money, with less well informed public buyers on the other side.