So they let a hoodie into the stock exchange and everyone got mugged. Well there’s a surprise. Facebook (NASDAQ:FB) has not only damaged its credibility but also the net wealth of hundreds of thousands of investors. The fact that the much hyped float has collapsed by close to 20% from its offer price in just a couple of days has ensured this shambles and its repercussions will remain on the front pages for a long time to come, but what gets less press is the fact that the Facebook listing is just the latest in a long line of IPOs that have been utterly disastrous for investors. In essence the average stock market investor is treated as the fool that the smart money sells to whenever it fancies a good exit and pays the consequences. This trail of consistently dire big IPO underperformance seems more and more like a form of systemic fraud. Can it be avoided? Let’s investigate…
Big IPOs, Bigger Investor losses?
A brief look at the larger capitalisation IPOs of the last few years shows a litany of disaster for anyone caught up in them. Many of these companies are household names brought to market by the most glamorous investment banks in the City, but there’s certainly been no glamour for buyers. The latest quotes show that Betfair (LON:BET) has slumped to reside an astonishing –52% below its float price, Ocado (LON:OCDO) –36%, Glencore International (LON:GLEN) –33%, Supergroup (LON:SGP) –41% and African Barrick Gold (LON:ABG) –39%. Hmmm spot the trend anyone?