This is a quick, lazy post.
I do not own any single name stock since almost four years (lie! I owe uncle Warren stock actually!), last IPO I participated in was in 2006. It is a part of the market I gave up so long ago, as you can imagine I do not follow it that closely neither. But I am a huge Deliveroo user (I gave up on UberEats after I fat-fingered a pizza order and they did not allow me to change it, like the fu***ng order was on a blockchain). I was basically made aware of the incoming IPO because it was featured on the app before my favourite burger joint.
After listening to 100 hours of podcasts where people were praising how cool it would have been if Robinhood would allow its users to participate in its IPO, I thought it was great what Deliveroo was doing. Obviously it went bad: Deliveroo went public on Tuesday and lost 30% in one day. ‘Bad’ and ‘Obviously’ strictly relates to the IPO first day bang expectation. Facebook IPO was a disaster and yet, if you bought back then you will be a gazillionaire by now. Well, if you consider it from Bill Gurley point of view, those IPOs were a success.
I do not want to call the IPO process as rigged, but I think it is important to clarify important nuances. The majority of people that will talk with you about the gains in an IPO are people that never participate in one. They think it is like going into an H&M store and buy a T-shirt. An IPO is instead closer to a Supreme drop: you might get lucky if you que for days in front of the right store, but usually the ones you see selling on Ebay the following days are friends with the store bouncer and/or owner.
An IPO is organised by some number of investment banks, and these banks decide who gets allocated the shares and who’s not. Banks know how ‘hot’ is the IPO for their clients and drive the conversation for the IPO price to the seller. If you are an investment banker and have access to these golden tickets, you want to first make happy your best clients. Because these are the guys that ultimately ‘pay’ for your bonus. You definitely do not care about this lad that put an order for £1k of shares via this online broker. You might want to give some business to the online broker…and then the online broker will think about its best customers first again.
All of this to say that if YOU get allocated some shares in an IPO, the IPO will most probably be a shit show. And it is not your fault. You are not unlucky. The system is designed like this. Do people out there make money in the first day of an IPO? Sure they do; but unless you have a certain wealth (or relationships), is not going to be you. There is no overnight success, you if you want to invest in an IPO, please consider the long term prospect of the company you are buying. Invest for the long term and IF there is a pop on the first day, well enjoy but do not react on it.
P.S. The best burger in London is Burger&Beyond, try to change my mind.
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