With the recent Twitter public offering, we may see "Mom and Pop," or retail, investors racing to invest in the "next hot IPO." Unfortunately, many of these investors will come out on the losing end of the equation.
Granted, some IPO deals are good for retail investors, but I'd argue the odds of that happening are stacked against you. Regulatory rules, designed to protect IPO investors, generate reams of disclosures about the company and the offering process, but unfortunately, many investors neither read nor understand these.
On an individual level, of course, there are strong companies that go public and yield high returns for initial investors. However, what I'm concerned by is a certain "narrative" about IPOs that relies heavily on several perceptions that are highly problematic.
Myth #1: Investing in an IPO gets you in on the ground floor.
People assume an IPO is an opportunity to "get in on the ground floor" of owning a good company. In reality, you're coming in on something like theRead More »from 5 Myths about IPOs: The dangerous narrative of “the next big thing”