There has been a lot of media buzz about Facebook's (FB) IPO share price; even the regulators are getting involved.
Nowadays, when companies come to the public market to raise capital, it is rarely about asking funding to execute their business plans but an opportunity for the early investor to cash out.
Therefore, when you have motivated sellers trying to get the best price for their shares, could the IPO buyers really do better? I went back and examined companies with IPOs in 2008 to see how these shares have performed.
Below is a list of companies that IPOed in 2008, with a chart illustrating the return characteristics for these companies at two specific time periods - the red line represents shares bought at IPO and blue line represents shares bought in Jan 2009, few months after the IPO.
| Company | Symbol | Jun 2012 Price | Jan 2009 Price | Offer Price | 2008 IPO Date |
| Grand Canyon Education | (LOPE) | $18.39 | $19.90 | $12.00 | 20-Nov |
| IPC The Hospitalist Co. | (IPCM) | 36.66 | 16.99 | 16.00 | 24-Jan |
| Hatteras Financial Corp | (HTS) | 28.46 | 25.24 | 24.00 | 25-Apr |
| Visa Inc. | (V) | 113.81 | 44.97 | 44.00 | 19-Mar |
| Heritage-Crystal Clean | (HCCI) | 17.91 | 11.06 | 11.50 | 12-Mar |
| American Water Works | (AWK) | 34.20 | 20.51 | 21.50 | 22-Apr |
| Western Gas Partners | (WES) | 42.66 | 14.85 | 16.50 | 08-May |
| Pioneer Southwest Energy | (PSE) | 25.76 | 15.56 | 19.00 | 30-Apr |
| Energy Recovery | (ERII) | 2.11 | 6.86 | 8.50 | 02-Jul |
| Intrepid Potash | (IPI) | 19.34 | 21.07 | 32.00 | 21-Apr |
| Fifth Street Finance | (FSC) | 9.45 | 6.34 | 14.12 | 11-Jun |
| Real Goods Solar | (RSOL) | 1.27 | 4.06 | 10.00 | 08-May |
| ATA Inc. | (ATAI) | 5.70 | 3.70 | 9.50 | 28-Jan |
| RackSpace Hosting Inc. | (RAX) | 47.02 | 4.84 | 12.50 | 07-Aug |
| Navios Maritime Acquisition | (NM) | 3.29 | 3.64 | 10.00 | 25-Jun |
| Safe Bulkers Inc. | (SB) | 6.26 | 6.64 | 19.00 | 28-May |
| RHI Entertainment | (RHIE) | 0.03 | 4.79 | 14.00 | 17-Jun |
| Pansoft Company | (PSOF) | 3.94 | 2.05 | 7.00 | 09-Sep |
| Bioheart Inc. | (BHRT) | 0.03 | 0.79 | 5.25 | 19-Feb |
(click to enlarge)
As you can see, it is interesting that in many instances, a buyer would be better off waiting a couple months, instead of buying the IPO shares. A bargain is usually found on the market, but rarely when it goes to the market.
However, we should note that buying at one period over another is not necessarily an indicator of absolute positive return. As shown in the chart, quite a few companies flunked in just a few years. A relatively better but negative return is not something we strive for.
Successful investing is all about paying great prices for companies that have strong fundamentals, and perhaps, avoiding paying for IPO shares.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
