Wausau,WI 10/8/12 (BasicsMedia) – As we all have recently seen, IPOs are a risky investment. The boom or bust theory that we are going to talk about here doesn’t discriminate big, prominent or companies new age, happening companies like Facebook ,which is just one of the most recent to be a bust. Other companies have suffered the same fate as Facebook. Deal site Groupon (GRPN) and Zynga (ZNGA) went public last year and at the moment are down 80% and 76% respectively and the winner of the losers is digital Domain (DSMGQ) down 96% and in chapter 11 at the moment.
Of course only time will tell whether the original investors really lose money. As the old saying goes, you’ve only lost money if you sell. Those orignal investors could make a pretty penny depending on where the stock sits say five years from now.
Up to this point in 2012 the U.S. has seen 105 IPOs priced out which is ahead of last year by 9, this is according to Reaissance Capital. The money raised by the IPOs of this year so far has been slightly over $36 billion which is a 23.4% increase over 2011.
The number of companies that has drawn up IPO plans and then taken them off the table stands at 50 so far this year. That is right on the pace set last year at this time, but we have a ways to go yet in 2012. One of the bigger and more recent names to pull out so far was Dave & Buster’s which bowed out last Thursday. Other big names to pull out this year include Fender guitars and CKE which is the own the Hardees and Carl Jr chains.
All this bad news would lead the common investor to think every IPO is going to head south at the moment but during the year to date, IPOs are up some 22% apiece from their original pricing. Some of the winners so far have been Michael Kors (KORS) up over 167% and Nationstar Mortgage (NSM) following with an 152% up swing.
As with all things a smart investor should take their time to look into each offering, the reasoning and the trends behind the companies. The year is far from over and the big winner could still be out there.
IPOs are like every day that we walk on this earth, most are never as bad as they seem in the worst of times and never quite as good as they seem in the best of times.
Disclaimer: We have no position in any of these companies and do not intend to trade any shares. Nor are we paid to write about them.