The red-hot IPO market of 1999-2000 has turned lukewarm at best. Through July 2001, new offerings for the year had raised $27 billion, vs. $57 billion for the same period in 2000. Most 2001 IPOs are trading below their offering price. Nevertheless, investors still have an ample number of IPOs from which to choose. Moreover, today’s IPO market may offer advantages for investors:
Better companies. When IPO activity slows, Wall Street avoids weak companies. Leading companies with strong management tend to be the ones offered to the public.
Better prices. As demand for new issues drops, so do the prices that underwriters ask from investors.
Better access. A few years ago, average investors couldn’t buy desirable IPOs, which were reserved for “heavy hitters.” Now, reduced demand means that IPOs are being offered to more individuals.
Don’t overload on IPOs but keep them in mind for the speculative portion of your portfolio.
