Who Benefits from an IPO? (Hint: It’s NOT the Investors!)

By: Curt Stowers

Uber, Lyft, Zoom, Slack, Pinterest, Beyond Meat. All of these companies recently “went public” as part of an “initial public offering” or IPO. In each of these cases, the founders of the company decided it was time to monetize their investment in time and effort vis-à-vis offering shares of the company to other for purchase. Each of these IPOs was a huge success—for the sellers that is!

The purpose of an IPO is NOT to make the buyer rich. The purpose of an IPO is to raise capital that can either be deployed in the business or provided to the owners of the business. I am 100% fine with this, as it is an example of capitalism at its finest!

What I am NOT fine with is people presenting the idea that IPOs are a guaranteed path to short term riches. Will some IPO’s go up 100, 1000, or even 10,000 times their initial offering price? Absolutely. However, as a rule, IPOs UNDERPERFORM other stocks!

The attached article goes into more detail on the topic of the performance of IPO’s. Click HERE to follow the link and read more.

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Photo credit: John Schnobrich on unsplash.com

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