September 12, 2013
"What do you think about this company - they're going public and I want in!" From time to time these calls come to my office. Questions regarding a company that is going public and for one reason or another, it's going to be the next best thing. Maybe it will. Then again, maybe it won't. When it comes to evaluating new public companies, it is wise to consider the numbers behind the company - profitability, debt, and all of the wonderful ratios that we use to evaluate financial strength first. Then consider the hype - but take it with a grain of salt. This was our advice when Facebook went public in May of 2012. In most cases, a wait-and-see strategy with an IPO can prove to be the most prudent plan of attack.
Consider three companies that have all gone public within the last couple of years: LinkedIn (professional networking), Facebook (social networking), and GOGO (wireless internet provider). The stories appear quite similar.
Hindsight is indeed 20/20, and knowing the right time to invest in a newly public company is at best an inexact science. But if you believe in the company and its long-term potential for growth, when it comes to an IPO, the wait-and-see strategy can often provide the potential for a healthy return.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).