2011 is definitely not turning out to be a year for IPO investors. IPOs have lost an average of 17% so far. The speed at which some of these have become penny stocks is truly amazing:
| Ticker | To-date performance |
| BGLOBAL | -85% |
| ACROPETAL | -85% |
| SHILPI | -84% |
| CORAL-HUB | -80% |
| SERVALL | -79% |
| BROOKS | -77% |
| SANGHVIFOR | -72% |
| TELEMARINE | -56% |
| SPYL | -56% |
| SRSLTD | -51% |
| DYNASYS | -50% |
Out of the 69 stocks that were analyzed, an opening day fizzle forebodes a dismal future for the stock: 48% of the IPOs had a down day on their first day and continue to perform poorly till date. 25% of the IPOs performed poorly in spite of spiking the first day – so there really is no magic forecasting too that can guide investors through the process.
I would take the side of Warren Buffett who once said:
It’s almost a mathematical impossibility to imagine that, out of the thousands of things for sale on a given day, the most attractively priced is the one being sold by a knowledgeable seller (company insiders) to a less-knowledgeable buyer (investors).
An IPO’ed stock just doesn’t have all the pieces of information that an astute investor considers before buying the stock. You cannot do technical analysis on a stock that has never traded, nor can you dig into its previous years’ balance-sheets to discover (or at least verify) strengths and weaknesses. It would be smart to check out the lead book-runner as well. If its some garage operation based out of Kalasipalya, then it would serve you well to stay away from the issue. For example: BGLOBAL, ACROPETAL, SHILPI, SERVALL were run by Almondz Global Securities, Saffron Capital Advisors, D&A Financial Services, Keynote Corporate Services respectively. The next time you see issues brought out by these guys, tread carefully!
Here’s the chart you’ve been waiting for:
