Stock IPO's (Initial Public Offerings)

[Recyclersteve]

I'd like to start a new tracking thread related to activity on stock IPO's. For those who aren't familiar with the stock market these are Initial Public Offerings. In other words, this relates to the first trading activity on a stock which was privately held until the IPO. Stocks that could be potential future IPO's which are fairly well known include AirBnB, Uber and Lyft.

Some IPO's are rocket ships. Others start really strong for perhaps a few days to a few months and then go back down, sometimes even well below where they traded on Day 1 (Example: Twitter- ticker symbol: TWTR). Some IPO's never do well at all or have an extended period of poor performance (Example: Blue Apron- ticker symbol: APRN).

Nonetheless, this could be a place to discuss upcoming IPO's and talk about whether these are worth a potential gamble for a trade only on Day 1 (maybe even just for a few minutes) or are worth holding for the longer-term.

For those who think precious metals can be volatile, IPO's are often even more volatile. So don't think that you can read a little about some exciting company and put your life's savings into it. You can definitely lose 20-30% or more in a single day and sometimes in just a few minutes. Yes, you can make that much as well. IPO's are meant for speculative capital- money you can afford to lose. Now you know.

Here is a little bit about the mechanics of IPO's- there are several quirks to trading them. Rules will vary from broker to broker:

1) Several firms will not allow market orders to buy on Day 1 or before. You MUST use a limit order to specify how much you will pay per share. Even if they allow you to place a market order to sell the stock, it can be moving so wildly that I wouldn't want to take the risk of entering a market order to buy or sell on Day 1. Each person and brokerage firm will have their own preferences here.

2) RE: type of account to buy the IPO in- let's say you have three accounts. Account A is a retirement account. Account B is a non-retirement (taxable) account that does NOT allow you to use margin- the account has only cash and stock in it. Account C is a non-retirement (taxable) account that DOES allow you to use margin. Any big profit in accounts B or C will be considered taxable income to you- of course, a loss could result in a reduction to your taxable income. The killer is if you think you can use margin in Account C to buy this new IPO. I feel pretty confident in saying that your broker will likely NOT allow you to use any margin buying power to buy the IPO in Account C. So if you buy a bunch of stock, it may cause your buying power to absolutely plummet. It might even trigger what is called a margin call, where you are forced to do one of two things- deposit more money into your account or sell stock. If you do nothing, the broker might sell stock for you without telling you first. Be super careful when buying IPO's in margin accounts!

3) The offer price will be the price that insiders and truly high dollar people get the shares for. This is announced usually the evening before the stock begins to trade. You could have an initial price range of $12-14 followed by a final offer price of $15 and then the price the stock opens at the following day could be just about anything ($10, $20 or even $30). So if you have a limit to buy the stock at $15.50 because the final offer price was $15 and the stock opens at $16 and runs from there to the low $20's in a few minutes, too bad!

4) Getting shares of the IPO at the offer price- decades ago this could be a windfall for some high dollar clients. Most everywhere now it is just a token gesture. Rules may vary greatly from broker to broker. Here is basically what happens: You go onto their website to qualify to get shares of the IPO at the offer price. You have to often times indicate that one of your investment objectives is "Speculation" with some brokers to have even the potential of getting shares at the offer price. So if you say your objectives are "Growth and Income" (you can have multiple objectives in the same account), for instance, you may be ruled out from getting shares at the offer price no matter how much money you have. If you get any shares, it will often be just 100 or maybe 200 shares, even if you have millions of dollars with your broker and have dozens of different accounts. Also, there is often a restriction that the shares you receive at the offer price must be held for at least 30 days or you will be assigned a trade violation from your broker and potentially have your account restricted from trading for a time or even closed by the broker. You may hear stories/legends about how people made a killing by getting large quantities of shares (thousands of shares) at the offer price. In my opinion, it hasn't really worked this way for perhaps 15-20 years. So don't get too excited about it. That said, there is (potentially) plenty of money to be made buying along side everyone else who doesn't get shares at the offer price. An advantage to buying shares on the open market on Day 1 is that you will often be allowed to sell the shares right away if you want, instead of having to hold for 30 days. So don't feel bad at all.

5) Also, in terms of qualifying to get IPO shares at the offer price, it is often a two-step process. Let's say that a stock will have it's first day of trade be on a given Friday. You should be on your broker's website the Sunday, Monday and Tuesday before that Friday to see when/if they will be participating in that IPO and have shares available. If you are interested, you give your initial indication of interest. Then the stock finally prices on Thursday several hours after market close (4pm EST). You are not done yet. Now you have to reaffirm your interest, since the stock has priced. In other words, previously you said you were interested in getting, say, 200 shares of the upcoming XYZ IPO. Now that it finally priced at $15 a share on Thursday evening, you have to indicate you are willing to pay $3,000 to buy 200 shares. Even if you ask for 200, you may get 100 or even 0. Don't fret. Think of it this way. If you ask for 10,000 shares and get 0- that could potentially be a real good trade for the next day on the open market because of huge demand for the stock. On the other hand, if you ask for 1,000 shares and get even 300, there is a pretty good chance you just got 300 shares of what will be a real dud!

6) When you are entering limit orders to buy before the stock opens, you may have a limit on the highest price you can enter. Let's use a stock which priced at $15 a share the night before the IPO. At my broker for instance, the night before the IPO I can enter an order to buy at $30-50 a share if I want without a problem. Why would I enter such a high price? I want to be as certain as possible that when the stock opens the next morning I will be the proud owner of that stock. More on that below.

The morning of the IPO (before the markets open), there is a cap of what appears to be around 30-35% on the price of the stock. In other words, the night before the stock begins to trade, I enter a buy order to pay $50 a share (or better- which means that if the stock opens below $50 I get it at that price) for a stock where the final offer price was $15. The next morning I want to lower my price to $30. The system won't currently allow me to do this. I will have to call a broker on the phone and have them change the order for me. This can be very frustrating when a stock is getting ready to open and you are talking about thousands of dollars on the line. Again, this will vary from broker to broker- find out what your broker allows before trading.

7) Why would one want to enter a price of $30-50 a share for a stock where the final offer price was only $15? This happens to do with strategy, and my answer will likely differ from others talking about the same thing. I use a sky high buy price because I want to be almost 100% certain when the stock opens the next morning that I already own it. One problem with this strategy is that the higher price will result in your buying a lot less shares. I look at it differently though. Let's say the final offer price is $15 and you really want to buy the stock. You enter an order to buy it at $20, which means that if it opens at $20 or less you own it. Now, let's say the stock opens at $20.25 and starts going up immediately. Many people will get emotional and say to themselves "I missed it by just a little bit. Let me change my price." They change it to $20.50. While they are changing the price, the stock has already hit $21 and is still moving fast. Then they change their price to $22. Finally their order is filled at $21.90. And that is because I have already entered my sell order to get rid of my stock to this emotional person who is chasing it. I might also be selling to the person who decides to wait until the stock opens for trade and wants to see how it is acting before they enter a buy order. I want to be counting my profits when others are emotionally chasing a stock.

8) If you have to call your broker to discuss IPO's in depth, expect to get a person on the phone who has likely never once bought an IPO with their own personal money. So they can discuss it from an academic standpoint perhaps, but may struggle to answer your "real world" questions. They might even have to read you a disclaimer or point you to one on the website they have. Don't be too frustrated. Brokers are often limited by company policy in terms of what they can do with their own personal money. At my old firm, if our company was offering shares of the stock to clients at the offer price, that same stock was on an employee restricted list. You could potentially lose your job if you bought the same stock in your own personal account or an account of a family member when it first started trading. At the risk of sounding like I am trying to pat myself on the back, you will have a hard time matching or even approaching the level of expertise contained in this message and perhaps later on in this thread.

9) Stock pricing can move super quickly up and down on Day 1. Even a move of 50 cents a share to $1 a share within a few seconds while you are entering your order is not too much to be expected. Also, keep in mind that the IPO won't usually start trading on Day 1 until well after the 9:30am EST market open. It will often be a full hour to 90 minutes (or even two hours in some circumstances) before the first trade. If you are not able to watch this closely when it opens for trade, you are at a disadvantage! Caveat emptor!

10) You will find that it is much easier to quickly enter orders to buy and sell these potentially hyperactive stocks if you have a high speed internet connection along with a software program that offers real-time streaming quotes. If you have to refresh your screen every time you need an updated quote, you are really reducing your odds of success.

11) If you feel that an IPO is ridiculously expensive on Day 1, you might be tempted to short it. That is, you might want to bet on the stock going down, not up. IPO's are not marginable on Day 1 (and often up to the first 30 days or so) and you need a stock to be marginable to sell it short. If you try in a margin account to short the stock on Day 1, you should get an error saying that it isn't marginable and not allowing you to place your order.

12) Expect your emotions to be all over the map on Day 1. One minute you may feel that you've finally discovered the holy grail to financial independence. Fifteen minutes later you might say "What the HELL did I just do? How am I going to explain this to my wife/husband/significant other? I should have known better. Now I am that much closer to bankruptcy. I am SUCH AN IDIOT! I should have stuck to what I knew."

13) Consider market circumstances before you invest/speculate in an IPO. For instance, in 2015 when the price of oil was plummeting (a barrel of oil went from around $105 to the high $20's from roughly September, 2014 to early 2016), it would have been quite difficult to invest in an energy or pipeline IPO. Biotech is very difficult- there are hundreds of publicly traded companies working on cures for cancer. There are likely a few dozen biotech IPO's which begin trade each year. I personally have found the degree of difficulty with biotech in general to be very, very high and I've had lots of trading experience over the last couple of decades or so. On the other hand, if the market is acting fine, technology stocks are acting fine, and IPO's are acting fine, a well thought out prudent speculation in a tech IPO might be worth considering.

I've tried to be reasonably thorough here in my discussion about IPO's. I'm sure there will be other points I have yet to mention that need to be considered. Try not to get caught up in the excitement with money you can't afford to lose and lose quickly.

A website that has quite a bit of commentary on IPO's is seekingalpha.com. You just type the symbol of the stock at the top right to get started. Also, Renaissance Capital has a site devoted to IPO's which has a calendar of upcoming IPO's. There are others as well.

I hope this information doesn't scare people too much from trading IPO's. I have personally traded dozens of IPO's and done quite well since my first IPO trade in mid-2011 (that first one was LinkedIn- Ticker LNKD- since bought by Microsoft). I probably trade perhaps 2-3% of the IPO's that can be traded each year, so I do tend to be pretty selective. In general, I have done very well to exceptionally well with those I've traded. I do like some companies getting a lot of buzz. Sometimes, I have invested in companies where it sounded like it had a product that would be difficult for others to copy quickly- in other words, they had a wide moat. Some of these stocks don't get a lot of attention. An example there was Impinj (Ticker: PI), which is involved in the internet of things.

My goal is almost always to get in at the open on Day 1 at whatever the opening price is (and not even a minute later- I don't want to be chasing the stock, but rather selling to the chasers- I wrote about this above). My goal is almost always to get out within a few minutes or perhaps hours or perhaps by the end of Day 1. I have a pretty strong fear of holding the stock overnight after the first day of trade. There are some exceptions, but not too many.

On my next post I will discuss the first IPO for this thread. I am very interested to hear your war stories about IPO's you've traded or stories about others you know and love that have traded IPO's (good or bad). Sorry to be so wordy. This is a very involved subject.

[highroller4321]

Are you currently watching any IPO's?

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Today I traded the Roku (Ticker: ROKU) IPO. ROKU is a company which allows you to get streaming TV and movies on your portable devices. The offer range was $12-14. The final offer price was $14. It opened at $15.78 this morning at 10:40am EST, which is what I paid for it. My orders to buy were entered last night.

I bought 1,700 shares and sold at an average price of around $16.61ish, netting over $1,300 on the trades in just six minutes. $1,300+ in six minutes isn't too bad but... I would have bought a lot more shares (probably around 15,000), but I had to teach a class of high school students about the stock market this morning. Those kids have no idea how much that cost me- the stock was $18.05 around 11:52am EST, around $19.96 at 12:26 EST and closed at a whopping $23.50- the high for the day. Now in fairness I would have never held 15,000 shares the whole day. My profit objective, if I was sitting at my computer watching closely, would have been $2 a share. Still, that would have been a profit of around $30,000 and I settled for about $1,300. Now you can see what I'm talking about on these IPO's- they can be very wild!

To answer the next question I anticipate people are thinking about, "NO" I don't have any plans on buying this stock tomorrow and perhaps never again in the future. I can easily see where this could go higher for another day or two and then go down sharply before stabilizing. Look at the recent Redfin (Ticker: RDFN) IPO for an example where this happened.

Even though I left a ton of money on the table, I have no regrets whatsoever. Things happen for a reason. There is some reason (it's beyond me at this time) why this happened this way.

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Regarding future IPO's- Uber is one getting a lot of attention. I have no idea when or if they go public. I've heard talk about a market valuation of something like $70 billion (or even more) for the company right now. The problem I have with Uber from an investment perspective is this- think about what they do. It is just an app that someone created to connect driver and passenger. That's it- the company doesn't even own the cars! So you could argue that this will be ridiculously overvalued the minute it starts trading. On the other hand- just because it is ridiculously overvalued doesn't mean the stock price won't continue to go up. So the proverbial devil sitting on one of my shoulders would be debating the angel sitting on the other shoulder.

As an example, compare Uber with a company like Ford Motor Co. (Ticker: F), not a recommendation by the way. But Ford owns lots of land, has plants and raw materials and robots all over the world. They have lots of tangible assets they could sell that are worth lots of money. Uber doesn't have this. That said, people who buy IPO's on Day 1 don't ask too many questions about valuation. I'd say that those who do ask a lot of questions and carefully consider valuation typically don't buy IPO's when the stocks begin begin to trade. I'd go one step further and say that if an IPO was really cheap on Day 1, I'd be wondering what was wrong. Does the company have a new competitor that they are secretly worried about or a lot of potential legal liability? Are they going public to get out while the getting is good? I'd be very skeptical.

[highroller4321]

I think uber would jump just because of the hype.

[Recyclersteve]

I agree that Uber could definitely jump because of the hype and perhaps jump substantially. On the other hand, I remember the Alibaba (Ticker: BABA) IPO which got tons of hype but was quite a dud on Day 1.

One of the potential issues you have with a new stock that is flying and has gotten quite expensive is that there is always the potential for someone with credibility to come out and say why the stock is overvalued. This could be Barron's or someone like Citron Research (Andrew Left) or Muddy Waters.

As an example- look at the Voxeljet (Ticker: VJET), a 3D printer IPO from October, 2013. The stock opened at $20.00 on October 18th and went to an all-time high of $70.00 on November 18. The very day that it hit the all-time high, Citron Research came out and explained in great depth (usually about 8-10 pages or more) why it was greatly overvalued. Three days after he said how the stock was overvalued, it had gone from $70.00 to $32.26. The stock is now $5.55 a share and hasn't been above $10 a share in quite some time. I honestly think Citron's report had a lot to do with the stock going down so quickly and so much.

It is good to have a healthy degree of respect (maybe fear is a better word) when it comes to IPO's.

[highroller4321]

I agree that Uber could definitely jump because of the hype and perhaps jump substantially. On the other hand, I remember the Alibaba (Ticker: BABA) IPO which got tons of hype but was quite a dud on Day 1.

One of the potential issues you have with a new stock that is flying and has gotten quite expensive is that there is always the potential for someone with credibility to come out and say why the stock is overvalued. This could be Barron's or someone like Citron Research (Andrew Left) or Muddy Waters.

As an example- look at the Voxeljet (Ticker: VJET), a 3D printer IPO from October, 2013. The stock opened at $20.00 on October 18th and went to an all-time high of $70.00 on November 18. The very day that it hit the all-time high, Citron Research came out and explained in great depth (usually about 8-10 pages or more) why it was greatly overvalued. Three days after he said how the stock was overvalued, it had gone from $70.00 to $32.26. The stock is now $5.55 a share and hasn't been above $10 a share in quite some time. I honestly think Citron's report had a lot to do with the stock going down so quickly and so much.

It is good to have a healthy degree of respect (maybe fear is a better word) when it comes to IPO's.

You are definitely playing with fire! I agree that it is very important to see where the "hype" or build up is coming from. There was initially a lot of hype surrounding SNAP (Snapchat), but almost immediately it started to get criticized for lack of revenue generation. It opened up much higher then expected and has done nothing but go down since.

[Recyclersteve]

Snapchat (Ticker: SNAP) definitely got a lot of attention in the national media. It opened for trade on Thursday, March 2, 2017 and was very strong Thursday and Friday. Here are some stats and details on the SNAP IPO:

Largest single IPO since Alibaba (Ticker: BABA) on 9/19/14.
Offer range: $14-16
Final offer price: $17.00
Opening price on Day 1 (3/2/17): $24.00
Day 1 close: $24.48
Day 2 close: $27.09 (after hitting an intra-day and still all-time high of $29.44)
Day 3 close: $23.77 (the beginning of the fall- note that it closed on Day 3 below where it opened on Day 1- not a good sign)

If you weren't out of SNAP within the first few hours on Monday the 6th, you likely experienced at least part of the fall. Yesterday the stock closed at $14.45, so you can buy all the shares you want now and pay substantially LESS than what insiders paid to get large chunks of it. Who says the deck is stacked against the little guy?!?

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Allow me to share a pet peeve that I have about how the media reports first day price action on an IPO. Let's use the following numbers for a mythical IPO, XYZ Company...

Offer price: $20
Day 1 Open: $30
Day 1 Close: $26

The media would say something like "In the first day of trade XYZ Company soared 30% today." They are using the $26 close and dividing it by the $20 offer price.

Realistically they should (IMHO) use the Day 1 close vs. the Day 1 open (the first price that average investors can potentially pay for the stock) and say that "XYZ Company was down $4 from the opening price on its first day of trade. Insiders who received shares at the offer price are still up 30%." Of course they will likely never do that, but the picture they paint is misleading, at least on Day 1.

[highroller4321]

Allow me to share a pet peeve that I have about how the media reports first day price action on an IPO. Let's use the following numbers for a mythical IPO, XYZ Company...

Offer price: $20
Day 1 Open: $30
Day 1 Close: $26

The media would say something like "In the first day of trade XYZ Company soared 30% today." They are using the $26 close and dividing it by the $20 offer price.

Realistically they should (IMHO) use the Day 1 close vs. the Day 1 open (the first price that average investors can potentially pay for the stock) and say that "XYZ Company was down $4 from the opening price on its first day of trade. Insiders who received shares at the offer price are still up 30%." Of course they will likely never do that, but the picture they paint is misleading, at least on Day 1.

100% agree!

[AdamsSamoa]

Got spanked on Snap Chat

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And last week's ROKU IPO got as high at $29.80 on Friday, but closed today at $20.81 (down another 11.7%). Since it opened last Thursday at $15.78, those who have held still have a decent profit, but what a roller coaster!

[Recyclersteve]

An update on IPO's...

Some upcoming high profile ones to be on the look out for are Dropbox, Lyft, and Spotify. These could all happen in the next 1-2 quarters. Three that are more realistic for next year are AirBnB, SaudiAramco (which could be the first stock with a trillion (yes trillion) dollar market cap), and Uber.

Today there was an IPO for CarGurus (Ticker: CARG) that I traded. A few details- first I didn't decide until late last night on CARG, so I didn't want to post anything here. In fact I was up until about 1am working to get ready for it (research it along with IPO behavior in general and placing trades). The offer range for CARG was $13-15. It priced at $16 a share, meaning that insiders who got shares got them at that price.

In terms of prep work, I read lots of info about CARG on the internet and checked to see how similar IPO's from the same space have done recently (i.e., Carvana). Also, I called a man who sold me an gently used SUV about four months ago and asked if he knew much about CARG. He said they were an "up and coming" company and that some weeks their dealership does more with CARG than they do with Auto Trader, which is saying something. Also, he said that his dealership wouldn't tolerate dealing with a company that does sleazy stuff, and he said CARG was very easy to work with and gave them high marks on ethics. Since my wife went to school with someone in the family that owns the dealership (and they are very conservative), this comment rang true to me.

My research, based on a spreadsheet I've used to track dozens of IPO's for the last six 1/2 years, indicated that it would be nice if this IPO could open:

1) 50-100% above the offer (offer was $16 so this equates to an open of $24-32); or
2) 100% or more above the midpoint of the range (midpoint was $14, so this equates to an open of $28+).

The stock opened at $29.00, so in my mind that was a positive.

Also, the time of the opening print is important. An opening trade between 60-90 minutes after the 9:30am EST market open seems to be the best time for a successful IPO to open according to my studies. Although it might be counterintuitive, NASDAQ (a computer automated system) IPO's typically open later than those on the good ole NYSE (where a human being works to determine a fair opening price)

This one opened at 10:49:21, which was right in the sweet spot of what I was hoping for.

Of course, I have no control over when the stock will open and what price it will open at. But if it behaves as I hope, then I am more confident that a large position will be a profitable trade. And confidence, in the trading game, is important.

Now, at 10:49:35, just 14 seconds after the open, the stock traded at $27.62- I was LOSING $1.38 per share in just 14 seconds. Remembering the Shake Shack (Ticker: SHAK) IPO which did the same thing, I held on. The very next minute (just like with Shake Shack) I had a profit. At 11:01am EST (12 minutes after the stock opened), I was out of the stock in six different accounts and netted a profit of 2.9%.

Another item I've noticed on my spreadsheet studying IPO behavior is that when I made a 3% or greater profit, those have been some of the very best IPO's for me. In this case I netted 2.9%, so I won't complain. All in all, this was my best IPO since the Coupa Software (Ticker: COUP) deal in October, 2016. I was confident in the performance of the CARG stock, so I took a larger than normal position.

Some might be thinking (about my comment in the above paragraph) "Duh, when I make 3% or more I do better. Of course it is that way, you idiot!!" But keep in mind that someone could make just 1-2% and trade a HUGE number of shares and still enjoy a successful IPO.

Another item I've noted on my spreadsheet is that October, November and December for me have been the three best months of the year to trade IPO's. So I will be watching closely the next 2 1/2 months.

One thing I've been asked a lot over the years is "Would you buy this stock again?" (meaning would I take a new position after Day 1) Frankly, I don't know. Amazon (Ticker: AMZN) could come in and disrupt the space. It is possible that I will never trade this stock again. Many IPO's that I've had good luck with on Day 1 have never been bought by me after that first day. Some, like Impinj (Ticker: PI), I've traded repeatedly with mostly very good to excellent results.

[Recyclersteve]

You are definitely playing with fire!

Fortunately, at this point I am using "house money", so to speak. I have told my wife that some day we may lose $20k or more on an IPO in a single day so even though I definitely don't want it to happen, I am ready for it when it does.

The results have been so overwhelmingly positive in my favor (44 profits and just 2 losses on IPO's in about 6 1/2 years) that it wouldn't make sense for me to back away from this type of opportunity at this time.

I hope this doesn't come across as bragging. I look at it this way. If a friend or acquaintance of mine was doing something that was working, I'd want to know about it. But I'd have lots of questions about the specifics, so I figure it is important to provide specific details to "pay it forward" if you will.

[Recyclersteve]

Another discovery I made about IPO's and this might sound strange, but the numbers bear it out. Think about something as simple as whether the opening number on a stock (IPO's- only on Day 1) is a round or odd number. I never thought it to be significant- til now.

My study of 46 IPO's since 2011 shows:

22 of the IPO's opened with round numbers (a round number being defined as something that ends in $xx.00--$10.00 and $11.00 are round numbers, but $10.50 isn't under my system). The other 24 opened with odd numbers.

The round number IPO's yielded profits that were 217% the size of the profits on the odd number IPO's. Interesting- I would have guessed it might be the other way around. My wife commented that this might be a system set up on Wall St. for those close to the markets to know when the person who sets an opening price is trying to perhaps send a private signal to those on the inside that they think a certain stock has potential. Interesting thought, I must say. We shall see if this continues to behave this way.

I don't see any tendency for either the NYSE or NAZDAQ to be leaning one way or another. Both are roughly 50/50 when it comes to using round or odd numbers on their opening prices.

[highroller4321]

Another discovery I made about IPO's and this might sound strange, but the numbers bear it out. Think about something as simple as whether the opening number on a stock (IPO's- only on Day 1) is a round or odd number. I never thought it to be significant- til now.

My study of 46 IPO's since 2011 shows:

22 of the IPO's opened with round numbers (a round number being defined as something that ends in $xx.00--$10.00 and $11.00 are round numbers, but $10.50 isn't under my system). The other 24 opened with odd numbers.

The round number IPO's yielded profits that were 217% the size of the profits on the odd number IPO's. Interesting- I would have guessed it might be the other way around. My wife commented that this might be a system set up on Wall St. for those close to the markets to know when the person who sets an opening price is trying to perhaps send a private signal to those on the inside that they think a certain stock has potential. Interesting thought, I must say. We shall see if this continues to behave this way.

I don't see any tendency for either the NYSE or NAZDAQ to be leaning one way or another. Both are roughly 50/50 when it comes to using round or odd numbers on their opening prices.

Very very interesting. What time frame did you use to show the 217% profit? 24 hours, days or weeks?

[Recyclersteve]

The 217% is merely a reference to a particular type of trade (openings with round numbers) versus another type (openings with odd numbers). It doesn't mean I made 217% on the stock. So, if IPO's of a certain type yielded profits that averaged 1%, then IPO's of another that yielded an average profit of 2.17% were more than double the size.

Also, I am NOT waiting until the stock opens to place my orders. My buy orders are always entered well before the stock opens and often times the night before. So I have no way of knowing whether the stock will open at, say $20.00 a share (round number) vs. $20.10 or $19.90 (odd numbers).

In terms of the buy prices I use, I want them to be high enough so that I am virtually 100% certain that when the stock opens, I already own it and can begin to enter orders to sell to those chasing it. For a stock with an offer price of $20, I may enter an order to buy at a limit price of $40.00, which means that if it opens at $40.00 or any lower, I own it at the price the stock opened at. So if it opens at $32.50, then I just bought it at $32.50.

The most I ever made (percentage wise) was a little over 40% on LinkedIn (formerly traded as LNKD, but bought by Microsoft) in 1 hour, 10 minutes in May, 2011. The most I ever made dollar wise on an IPO was-- well let's leave that one confidential.

My goal is to be out as quickly as possible- within 10-30 minutes is usually a successful IPO for me. I've had a number where I was in and out in just 3 minutes, and most of those quickies were very, very successful. Holding an IPO even overnight is something I'm generally not comfortable doing. There are occasional exceptions- I held Michael Kors Holdings Ltd. (Ticker: KORS) for about a month and made about $20k on that one. If KORS even tried an IPO in this "retail is dead- Amazon is killing everyone" environment, there is no way I'd have bought nearly as many shares- if I did the IPO at all.

[highroller4321]

The 217% is merely a reference to a particular type of trade (openings with round numbers) versus another type (openings with odd numbers). It doesn't mean I made 217% on the stock. So, if IPO's of a certain type yielded profits that averaged 1%, then IPO's of another that yielded an average profit of 2.17% were more than double the size.

Also, I am NOT waiting until the stock opens to place my orders. My buy orders are always entered well before the stock opens and often times the night before. So I have no way of knowing whether the stock will open at, say $20.00 a share (round number) vs. $20.10 or $19.90 (odd numbers).

In terms of the buy prices I use, I want them to be high enough so that I am virtually 100% certain that when the stock opens, I already own it and can begin to enter orders to sell to those chasing it. For a stock with an offer price of $20, I may enter an order to buy at a limit price of $40.00, which means that if it opens at $40.00 or any lower, I own it at the price the stock opened at. So if it opens at $32.50, then I just bought it at $32.50.

The most I ever made (percentage wise) was a little over 40% on LinkedIn (formerly traded as LNKD, but bought by Microsoft) in 1 hour, 10 minutes in May, 2011. The most I ever made dollar wise on an IPO was-- well let's leave that one confidential.

My goal is to be out as quickly as possible- within 10-30 minutes is usually a successful IPO for me. I've had a number where I was in and out in just 3 minutes, and most of those quickies were very, very successful. Holding an IPO even overnight is something I'm generally not comfortable doing. There are occasional exceptions- I held Michael Kors Holdings Ltd. (Ticker: KORS) for about a month and made about $20k on that one. If KORS even tried an IPO in this "retail is dead- Amazon is killing everyone" environment, there is no way I'd have bought nearly as many shares- if I did the IPO at all.

The 217% number came from a formula so I am curious to the parameters of the formula. The formula has to start with the open price and end at a certain point. You are saying round numbers are up 217%.

So for example.
Start point of $10 end point of ??
Start point of $10.50 end point of ??

What is the time frame used to show that the $10 (Round number) stock on was 217% higher?

[IdahoCopper]

WRONG.

If stock AAA realized a 1% profit, the stock that realized 217% more than AAA, stock BBB, realized a profit of 2.17%, which is 217% more than what AAA realized.

In no case did he buy for $1.00 and sell for $217.00.

[Recyclersteve]

WRONG.

If stock AAA realized a 1% profit, the stock that realized 217% more than AAA, stock BBB, realized a profit of 2.17%, which is 217% more than what AAA realized.

In no case did he buy for $1.00 and sell for $217.00.

Idaho Copper is saying the right thing. There were no 217% profits. The largest was 40%+ on LinkedIn in one hour, 10 minutes during May, 2011. The weighted average of the profits, by the way, was 5%.

To consider why I think it is appropriate to use a weighted average, look at the following example:

A person buys $90k of Stock A and makes a total of $1,000 (1.1% profit).
The same person then buys $10k of Stock B and makes a profit of $1,000 (10% profit).

Some might say that their average profit was 5.55% [(1.1 %+ 10%)/2], but that is clearly misleading IMHO. I am counting the profit as 2% ($100k total investment that made $2k). The person spent 9x as much money on Stock A than they did on Stock B. I hope that helps to clarify the situation.

[highroller4321]

WRONG.

If stock AAA realized a 1% profit, the stock that realized 217% more than AAA, stock BBB, realized a profit of 2.17%, which is 217% more than what AAA realized.

In no case did he buy for $1.00 and sell for $217.00.

Idaho Copper is saying the right thing. There were no 217% profits. The largest was 40%+ on LinkedIn in one hour, 10 minutes during May, 2011. The weighted average of the profits, by the way, was 5%.

To consider why I think it is appropriate to use a weighted average, look at the following example:

A person buys $90k of Stock A and makes a total of $1,000 (1.1% profit).
The same person then buys $10k of Stock B and makes a profit of $1,000 (10% profit).

Some might say that their average profit was 5.55% [(1.1 %+ 10%)/2], but that is clearly misleading IMHO. I am counting the profit as 2% ($100k total investment that made $2k). The person spent 9x as much money on Stock A than they did on Stock B. I hope that helps to clarify the situation.

I think you both are possible misunderstanding my question.

The weighted average still has to be calculated at a particular time frame.

Stock A 24 hours after IPO
Stock B 4.5 years after IPO
Stock C 4 minutes after IPO

[Corsair]

This is a fascinating thread. Steve, I look forward to further updates as 2017 comes to an end.

[highroller4321]

7 IPO's before the end of the month.

Thoughts on QUDIAN INC. QD?

[Recyclersteve]

Chinese IPO's are probably fairly neutral in general. After tons of fanfare, the huge Alibaba IPO (Ticker: BABA) on 9/19/14 opened the day at $92.70 and closed the day at $93.89. Yawn!

That said, there are a bunch of people who just don't trust Chinese stocks. There were a lot of reverse mergers (Chinese companies getting together with companies in the U.S. that sometimes had only a single employee) back ca. 2007 and again ca. 2010 or so. A lot of these stocks went up sharply and then plummeted.

There is a guy (Andrew Left at Citron Research- citronresearch.com) who has chronicled lots of the Chinese reverse mergers. He, singlehandedly it seems, has caused lots of them to plummet.

So tread carefully.

Considering foreign IPO's overall vs. IPO's in the U.S., I haven't noticed a strong pattern either way. In other words, neither seems to greatly outperform the other.

[Recyclersteve]

I think you both are possible misunderstanding my question.

The weighted average still has to be calculated at a particular time frame.

Stock A 24 hours after IPO
Stock B 4.5 years after IPO
Stock C 4 minutes after IPO

Here is some more info to address the item mentioned by highroller4321:

PROFITS BY HOLD TIMES:

DURATION HELD PROFIT % NO. OF TRADES
1-4 min. 6.3% 7
5-9 min. 5.6% 6
10-19 min. 3.3% 4
20-59 min. 2.4% 2
60 min.+ (out Day 1) 3.4% 4
Day 1* 5.2%* 15*
Day 2 2.3% 3
Held >2 days** 5.4%** 5**

*NOTE: Hard to evaluate- some stocks were sold very quickly (just a few minutes), while others held for hours. Therefore, results for Day 1 are likely misleading. As these trades were all done more than a few years ago, I am unable to get the specifics on exact time held from my broker.

**NOTE: Without one IPO, the profit was just 0.8% on the other 4 trades. So just one trade greatly skewed the numbers.

NOTE: In general, profits for stocks held less than 10 minutes were much higher percentagewise than for those sold after 10 minutes. In reality, the 13 stocks held the shortest amount of time were all sold in 7 minutes or less. This goes to show that whomever your broker is, you have a big advantage if you have a trading platform where you can get real-time streaming quotes. In other words, you shouldn't have to refresh your computer screen to get an updated quote. If all you have is non-streaming quotes, you are at a big disadvantage to those of us who have streaming quotes. Another comment along these lines- I've had a few IPO's where I bought the stocks in 10 accounts or more. So I would sell shares in one account, switch to another account to sell those shares, etc. Even holding the stock in that many accounts, I've been able to sell all the shares in all the accounts in 3 minutes or so. So if it takes you longer than that to switch accounts and sell shares in another account, again you are at a disadvantage.

Sorry it took me so long to answer- it took a lot of hours to gather the info to put this together. But I was curious about it myself, so it was worth doing.