IPOs performance not good : 3 out off 10 deliver positive returns

by khalid on 24/09/2009 · 0 comments

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This year IPOs are coming in full swing as 13 already launched and a good number are in the pipeline.The flow of Initial Public Offering ( IPO), was completely dried up last year due to recession. But performance of these IPOs listing in bources is not adequate as per the result till now.

Should investors take the plunge? Going by how IPOs have fared in the past, you would have to have a strong heart! Roughly half the IPOs that garnered investor funds over the past seven years have lost money till date. However, the ones that managed positive returns delivered handsomely.

Business Line studied 285 IPOs made between January 2002 and August 2009 and their compounded annual returns over offer price for this analysis. The study showed that just three in every 10 IPOs have delivered a 15 per cent compounded return that one would expect from stocks. Further souring the picture, half the IPOs now trade at prices far below their issue price.

The timing of the offer had a significant impact on returns from IPOs. Those launched in 2007 and 2008 delivered the worst performances, with just three in 10 stocks floated in this period giving positive returns. In contrast, IPOs that came out in 2004 and 2005 saw far better performance, with more than six in 10 delivering positively.

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