You might find yourself eyeing the 2012 IPO calendar with a bit more scrutiny after the Facebook (Nasdaq: FB) fiasco.
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Although Facebook has been nabbing the most attention for disappointing its investors, it's hardly the first IPO to do so. It's all part of the fickle IPO process.
In fact, about 40% of the IPOs to hit the market over the past 12 months have seen their share prices fall below their IPO prices.
Facebook isn't the only factor to blame -- U.S. unemployment is up, the Eurozone debt crisis is sapping bullish spirit, and the upcoming U.S. presidential elections in November are adding to market uncertainty.
But avoiding IPOs altogether could also be a huge mistake.
Just ask those who bought the Google (Nasdsaq: GOOG) initial public offering. The Google IPO priced at $85, started trading at $100, and now trades around $560.
So how can you put yourself in the 60% group and earn a profit in the process?
With the right research and guidance, you can spot winners just like Google.
Do Your IPO ResearchInvesting in IPOs is like buying and selling any asset: due diligence is required.
An IPO, like a credit-default swap or subprime mortgage, is the ideal financial instrument for a limited set of circumstances. It is up to the individual or the institution to determine if the IPO they are considering is suitable for a long-term investment or a short-term flip.
If it qualifies as just a short-term flips, that is enough to tell you not to buy.
Whatever the investment objective, however, information is readily available for the necessary and needed due diligence.
For example, on March 17, 2011 Michael J. De La Merced wrote an article in The New York Times about the IPO of FriendFinder Networks (NYSE: FFN).
In his Timespiece,"FriendFinder Braves Choppy Market with IPO, Again," De La Merced did an excellent job of detailing his concerns with the stock, ranging from the disposition of the proceeds of the IPO to the accounting at the company to the number of times it had attempted to go public before and had to withdraw the offering.
FriendFinder Network IPO priced at $10 a share last year; it's now selling for around $1.15.
Other times an IPO can be hurt by factors having nothing to do with the financials of the company or the overall economic situation.
Take the Carlyle Group (Nasdaq: CG), a Washington, DC-based private equity group, which went public in May. Until Election Day in November, private equity groups will be vilified by the Obama Administration, unions and others due to Republican presidential candidate Mitt Romney's work with Bain Capital.
There is no way that can aid the share price of Carlyle Group. Now trading around $21 a share, Carlye Group has slipped from its IPO high of $22.45.