Pricing guidance for IPO shares
 

I'm interested in picking up some shares of an IPO; of course I'm not a millionaire so I'll be relegated to buying in the secondary market. Anyone have any input on where to find pricing guidance/predictions to help determine my limit order? Any other thoughts on buying in the secondary market on the first day welcomed, also.

Iffn it were me, I'd pick 4 or 5 other companies in the same industrial sector as the IPO,
companies the IPO will have to compete with.
Based on their key financial statistics, I'd rank all 5 best to worst.

Then I'd rank projected earnings, market growth, inventory, assets, etc all in an atrempt to come up with the big answer: MARKET CAP.

Ya figure out the market cap and that tells you what the company is really worth or at least SHOULD be worth.
Weigh it against the competition apples to apples so it's ajusted for that particuular sector.

Then find out how many total shares will be CREATED. Note that's way different than number of shares offered.
Usually they set aside a whole bunch for themselves and their cronies.

Figure out the number of total shares created (common and preferred) and divide the projected market cap by the number of shares, BINGO! price per share.

Clear as mother's milk.



PS It doesn't really work that way tho because logic doesn't have much to do with IPOs, lots of it is emotions of small investors (bandwagonners) and big boys who buy large chunks for speculation and sell it off 4 hours after the initial opening after driving the price up 40% higher than it should be.

And since I'm not a big time inverstment house with lots of pull, I can't but up large chunks of a stock before it's officialy available.
So I'd have to be one of the sheep.
Which is why I'll never ever spend a penny on an IPO.

Yep. For most an IPO is a gamble. If not a gamble its a way to cashout for the early investors. Figure out what % gain you would be happy with and put in a sell order immediately. The greedier you are the less your chance of success. If you are investing for the long haul I doubt you are thinking exit immediately.

I'm a peon too, but decided I wanted some Google back in the day when the IPO launched (a special offering as it were), and as Sammy says, it's a PURE gamble for us "bottom feeders" :D. Trader220 is an "old pro" at this...there's a thread in the archives where he relates how it all works behind the scenes. If I wanted to own a company "long term" (the only way I invest), then you're simply at the mercy of "what the market says", and are along for the ride. Most IPOs aren't "Google" fwiw, and I personally avoid them like the plague except for that one "hunch" which paid off. Good luck!

Very name specific and the first day is a crap shoot.

Some stats for the the last 12 months of IPOs.

From offer price to first day's close: +15.4%
From offer price to first month's return: +19.0%

Obviously most of the gain from the offer price is when it opens up. The trading that first day has nothing to do with investors. Traders reign. Funds buy more through the underwriters as they sell them through someone else. Makes them look good to the underwriter so they get larger allocations.

The best advice on the price is old fashion analysis. What do you think it is worth?

If you want to PM me the company, I can see how the deal is shaping up.

It is mostly up to you to know the price you are willing to pay. I don't think many analyst's give price recommendations on IPO stocks before they are publicly traded.

Have you analyzed the S1 of the firm you are interested in purchasing? This is probably the first place I'd start looking if I were serious about entering into an IPO.

Thanks for the feedback from all thus far. Sam, I agree w/your analysis completely - if only it applied, eh? Aggie - sending PM.

Rich - yup, read the S1 and I know what I'm willing to pay, my concern is that the opening price in the secondary market will be above that price and I'm just wasting my time thinking about it.

Now THAT'S a gamble I would be willing to bet on :p. I'll defer to the pros, but the price "us peons" get is RARELY the reported IPO price from my very limited observations....good luck!

Let us know how it turns out if ya don't mind....

If you're trying to buy on the first day (which I wouldn't),

I think you should just place your limit order for your comfort only as a 'safety' if the hype pushes the price up way too far for when it comes online.

If the market price is below your limit it will just get filled at the market price somewhere below your limit order, and you're off. If it's too expensive and your order doesn't get filled, then relax and be happy you still have all your money!


If it's a name-recognition IPO I certainly wouldn't buy on the first day. I would wait at least a few weeks until it (more often than not) finds a bottom and then (hopefully) get in the boat at that point.

A good example of that would be SHAK or BABA, both of which are huge name recognition IPOs that lost value for a few weeks before they finally settled in and made some good gains.

If I want to lose money I'll stick with oil well partnerships :rolleyes:
Jim