I don’t know if something has changed with how writers report on IPOs or if I’ve just started to pay more attention to the headlines. How often do you hear about an IPO surging out of the gate? Surge, bast, shoot, explode….the list goes on. What qualifies for such a descriptor? Most of the headlines around the 1st day performance of any IPO are greatly inflated.
Textbook example, today Wired.com ran a headline that stated, “Pandora IPO Pops 60 Percent.” Thankfully, the author was honest enough to include in the full headline (revealed when clicking the link) that the IPO “…Closes up nearly 9 percent.” What the headline should have said was Pandora’s IPO Popped then Fizzled.
I don’t think these types of headlines help the public perception of IPOs. IPOs are seen as easy/quick money to be had. Maybe if you’re an institutional investor that is connected with the investment bank doing the IPO offer. Otherwise, it’s often the case that a much hyped IPO will jump out of the gate high and then sink lower. Yes, exceptions do occur. Google would be one of them, but to think that an IPO is a ride to the top is an unwise bet.
Opportunity arises with IPO offers when the full magnitude/power of a company is not fully understood by most investors. The problem is that most investors understand pretty well the implications of new public company, especially those that attract a lot of eyeballs.