Unknown Professor

What to Look for In IPO Investing: Part I

Not to rain on anyone's parade, but I have a VERY difficult time with anyone who advocates that you can "beat the market" investing in IPOs. First off, there's a HUGE adverse selection problem. A great deal of research indicates that investment bankers allocate the good IPOs to their buy-side peers.

The article is also absolutiely correct that there are "pricing inefficiencies" in IPOs. They're incredibly difficult to value. However, I'd take issue with the idea that an individual investor (unless he or she has a great deal of resources behind them) could see through these mispricings.

That's not to say thant no-one can. The typical individual investor is competing with people and institutions who have a great deal of either non-public or quasi-public information. They have acccess to others on the street, their own traders, and so on. So I'd say it's highly unlikely that you can beat them at their own game.

There's also no empirical support for the "up two days is a buy signal".