5 November 2014

Are IPO's more than Get-Rich Scheme for the Promoters?

Looking at valuations imputed by the pricing of new issues one can only wonder if saving to invest in Equities can really ever provide a solution to the looming retirement crisis or the widening wealth gap between the rich and the rest of the population. What is really sad is the willingness of the media to be nothing but a marketing platform for the promoters of new issues. Case in point: The listing of Fever-Tree, a producer of drinks. This company sports a turnover of £28 million on an annualised basis but the IPO values the company at £154 million. This may or may not be the right valuation for this company (the backers had even hoped for £200 million!) but it is beyond me why respectable publications abstain from giving an opinion on the merits of this valuation. If anything, that is the most important piece of information that readers would deserve to find. More than 5 times revenues needs more justification than a homely write-up about how the founders started the business.