22 August 2012

IPO's - Facebook illustrates risks

The odds in Inititial Public Offerings (IPO's) are all too often stacked against the buyers. Insiders and the promoters of the IPO are interested in obtaining a high price and have a heavy propaganda machine on their side - despite efforts by the regulators to curtail one-sided advertising. There is insufficient protection against the insiders selling too early and investors are advised to favor IPO's where the majority - ideally all - of the funds raised goes to the company. The sale of a large stake by an early investor in Facebook illustrates (CNBC) the controversy surrounding IPO's.