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IPO Insights

Views 24812022.08.03

Are all IPOs worth investing in?

Chapter 6, October 28

What's new?

Shares of $MediaAlpha Inc(MAX.US)$ soared in their market debut Wednesday on October 28, 2020.

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MediaAlpha shares opened at $23 and ended trading at $31.15, a 64% jump.

MediaAlpha collected $175.8 million late Tuesday, after selling 9.25 million shares at $19 each, the midpoint of its $18 to $20 price range.

MediaAlpha CEO Steve Yi said in an interview,

I’m thrilled with the IPO and what it means for our team members. 

It’s an opportunity to reward their commitment, to recognize their hard work. It’s a milestone. Also, it’s the start of an exciting new phase and the start of our journey.

MediaAlpha uses artificial intelligence and data science to help insurance carriers find customers online. The company provides a digital-advertising platform to draw customers to insurance carriers.

However, another insurance company $Root Inc(ROOT.US)$ didn’t fare as well. Its much larger IPO initially rose 9%, then dropped below its $27 price before rebounding to end where it started.

Are all IPOs worth investing in?

Apparently, not all investors should invest in IPOs on their debut days.

When investing in an IPO, it is important to understand that it is akin to investing in the growth of a small company, a sunrise industry, a large corporate opening up to retail investors and being a part of its growth journey. 

Hence, it is important to take a good look at the company, the nature of business, its track record, management, competition, and its business outlook. A company in the growth stage may offer more potential for long-term capital appreciation. 

The valuation and the attractiveness of the IPO price band can be analyzed by reviewing the financials of the company, referring to research reports or by comparing with the valuation ratios of similar companies. This will give you a holistic view of the company’s prospects and help him understand if the IPO is overpriced, under-priced or fairly-priced.

You could check a newly-listed company's prospectus under the News, Announcement section on moomoo:

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Source: moomoo

Only companies with big growth potentials and reasonable valuation are worth investing in.

Source: Barron's, economictimes

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