Buying on IPO, a more miss than hit?

IPO Scorecard: Update On Selected Initial Stock Offerings

January 22, 2009: 03:14 PM ET

Company                      Symbol  Percent  Current   Offer  Date
Grand Canyon Education       LOPE       66%   $19.90  $12.00  20-Nov
IPC The Hospitalist Co.      IPCM        6%   $16.99  $16.00  24-Jan
Hatteras Financial Corp      HTS         5%   $25.24  $24.00  25-Apr
Visa Inc.                    V           2%   $44.97  $44.00  19-Mar
Heritage-Crystal Clean       HCCI       -4%   $11.06  $11.50  12-Mar
American Water Works         AWK        -5%   $20.51  $21.50  22-Apr
Western Gas Partners         WES       -10%   $14.85  $16.50  8-May
Pioneer Southwest Energy     PSE       -18%   $15.56  $19.00  30-Apr
Energy Recovery              ERII      -19%    $6.86   $8.50  2-Jul
RiskMetrics Group            RMG       -28%   $12.61  $17.50  24-Jan
Intrepid Potash              IPI       -34%   $21.07  $32.00  21-Apr
Fifth Street Finance         FSC       -55%    $6.34  $14.12  11-Jun
Real Goods Solar             RSOL      -59%    $4.06  $10.00  8-May
ATA Inc.                     ATAI      -61%    $3.70   $9.50  28-Jan
RackSpace Hosting Inc.       RAX       -61%    $4.84  $12.50  7-Aug
Navios Maritime Acquisition  NM        -64%    $3.64  $10.00  25-Jun
Cascal NV                    HOO       -64%    $4.33  $12.00  28-Jan
Safe Bunkers Inc.            SB        -65%    $6.64  $19.00  28-May
RHI Entertainment            RHIE      -66%    $4.79  $14.00  17-Jun
Pansoft Company              PSOF      -71%    $2.05   $7.00  9-Sep
Bioheart Inc.                BHRT      -85%    $0.79   $5.25  19-Feb

Here is a list of the IPOs in 2008 from Dow Jones news wire. IPO, Initial Public Offering, is a form of financing for company to get money (the other is through debt financing). The company tends go on a public listed exchange after the IPO, and its share will trade on these secondary market. IPO allows interested investors to own the company first hand.

I always kick myself from the Google IPO thinking it is way too expensive, and the stock price left me in dust. However, is buying IPO a wise thing to do? Underwriters, the people who are responsible for drafting up the offering, tend to work in a way like a real estate agent on the sell side. They are trying to figure out the maximum price they could offer before tickling off the investors.

More often or not, institution investors that invested in the early stages of the company are waiting to unload their shares as soon as the company goes public. Bargains are usually found on the market, but rarely when it goes to the market.