SmartMoney Blogs

Real-Time Advice
Our real-time advice on how market shifts and news impact you and your money

IPO Returns Look Lousy — Again

Regulators are reconsidering “quiet period” rules that prevent companies from acting like pitchmen ahead of initial public offerings of stock, but that can also restrict the release of new information that would warn investors away from shares.

Recent performance, meanwhile, offers a not-so-quiet reminder of why investors should approach IPOs cautiously.

Among 70 deals in the first half of 2012 tracked by Hoover’s, a data firm, the average is up 14.7% from its offering price. At a glance, that seems like rip-roaring growth compared with Standard & Poor’s 500-stock index, which is up 11.3% year-to-date.

But those numbers include hot IPOs whose shares were issued to a privileged few before opening for trading well above their offering price. A better measure of how the public has fared in these deals is how share prices have done since opening for trading.

The average of the 70 IPOs opened 12.6% above its offering price, and has since gained little more than 2%. Investors would have done much better by holding a simple, low-fee mutual fund that tracks the broad stock market.

Two quarters of deals don’t make for a pattern, of course. For that, look at the Bloomberg Initial Public Offering Index, which tracks how stocks do during the year following their debut. It has lost more than 20% over the past five years, versus a 5% decline for the S&P 500.

Better yet, look at long-term studies. Among 9,000 stocks that went public between 1968 and 2001, the average one underperformed the small-company stock market by more than two percentage points a year through 2003, according to a study by Wharton professor Jeremy Siegel. Other studies have documented a decline in operating performance following IPOs.

This makes sense. No investor would sell an asset today if he expected it to become sharply more valuable tomorrow. IPOs represent highly informed investors deciding the time is right to sell part of their stakes. When ordinary investors buy shares of a new offering, they’re betting they know better than the insiders. History suggests they don’t, on average.

A tweak to the quiet-period rules may give ordinary investors more information to go on. But what investors really need is a self-imposed hands-off period, to leave new issues alone for a year or two while the initial buzz dies down.


We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (3 of 3)

View all Comments »
    • By WebOsPublisher

      free download an Easy Icon Maker software for making icons.
      Easy Icon Maker Software , icon creator , icon changer , icon extractor
      Maker – download a free trial version and start to make your own
      icons right now!!
      What’s New
      Frequently Questions
      Easy Icon Maker
      Click to Enlarge
      Easy Icon Maker is a small and easy-to-use all-in-one
      icon utility for icon making, editing, changing, extracting, searching, and exploring.
      It allows you editing a transparent or opaque icon.
      The sizes may be 16 X 16, 32 X 32, 48 X 48, 64 X 64
      or custom it as you like. The colors may be Monochrome(1
      bit), 16 colors(4 bits), 256 colors(8 bits), true
      colors(24 bits), or true colors + alpha channel(32 bits).
      With Easy Icon Maker, you may edit your own professional
      icons easily and quickly with the built-in editor. You
      may also extract an icon from an EXE or DLL file. You
      may import graphic file such as BMP, JPG or GIF and
      save it into icon file or export icon file to graphic
      A capture button allows you capturing any area on the
      screen to the editor for editing. Filters functions
      allow you processing the icon with special effects such
      as lighten, soften, darken, lighten, blur, emboss, and more.
      This version includes four enhanced icon tools, they are
      Icon Changer ,
      Icon Searcher ,
      Icon Extractor ,
      and Icon Explorer .
      Now (ONLY US$29.95)
      Free Download
      (Size: 1.56 MB)
      New Features added in version 5.0
      Fixed an important bug of 32-bit Alpha Channel.
      Improved interfaces.
      New Features added in version 4.0
      True colors (32-bit) with Alpha channels added.
      Edit in RGB and Alpha mode.
      Change the order of an icon format in the file.
      Added toolbar for filters for easy work.
      Added features “Rotate”, “Flip”, and “Move”
      Open several instances of Easy Icon Maker at the same time, and copy data from one to another.
      Icon Explorer was added for exploring icons from files and applications.
      Download Easy Icon Maker 5.0(File Size: 1,602 KB)
      Features include:
      Support sizes 16 X 16, 32 X 32, 48 X 48, 64 X 64, and
      user custom
      Support Monochrome (1 bit), 16 colors (4 bits), 256
      colors (8 .bits), true color (24 bits), and true colors + alpha channel (32 bits)
      Support capturing an icon area from screen
      Fast, small and easy-to-use
      Windows XP Compatible
      Extract icon from DLL/EXE files
      Icon Searcher Tool – Search Icons from your computer files
      Icon Changer Tool – change binary file’s icons (EXE, OCX, DLL, SCR, …)
      Import from or Export to graphic files BMP, JPG, GIF
      Graphic Converter + Easy Icon Maker Now for ONLY $39.95
      Graphic Converter
      Click to Enlarge
      Graphic Converter
      is software for converting graphic formats.
      It supports reading graphics of BMP, DIB, JPG, JPEG,
      and more.
      It supports saving graphics to DIB, BMP, GIF, JPG, JPEG,
      ICO, TIF, TIFF, WBMP, WMF, EMF, PNG, TGA, and more.
      It supports screen capturing with different ways. It
      supports more than 50 different filters. It supports
      unlimited UNDO and REDO operations. More
      Details …Date: June 22, 2003 Download it here! (size: 2.1 MB)
      Now (ONLY US$19.95)
      Features include:
      * Open and view more than 30 images formats
      * Save and write more than 10 mages formats
      * Stretch image to ICON size and save as ICON file
      * Support editing image with selection, resize, rotate,
      add canvas, and more
      * Support more than 50 filters like
      * Unlimited UNDO and REDO operations
      * Full options of capturing, images formats, and other
      © 2002-2012 icon-maker.com . All Rights Reserved.

About Real-Time Advice

  • How breaking news — in the markets, Washington, and around the world — affects you and your money. Have a question about how current events may change your financial future? Email us at ask@smartmoney.com.