21st September 2011

And have you seen what's happened? Take a look here

The shares have been all over the place since the spring 2010 IPO but mainly downwards. Initial investors paid 180p – now they're worth 118p so those buyers have lost over a third of their money. And anyone who bought at the absolute top earlier this year has seen 60% of their cash evaporate.

Obviously, things can go wrong in the best ordered of worlds. But grocers should be long term stocks on the safer end of the equity risk scale.  

In Ocado's case, the negatives were obvious to almost any shopper. It depended on Waitrose fans for its orders and Waitrose was going hell for leather (well, not quite, no one in the John Lewis environment moves without big thinking time) to take the online grocery business in-house. Before the IPO, Waitrose already had its own vans outside the M25. It was no secret that Waitrose  would move into the lucrative London area as soon as it could -local store managers even informed customers. And that moment was not far from IPO time.

But don't just dwell on Ocado – the firm described by a stock market wag as a zero at both ends and a cad in the middle. Try the far bigger Glencore, the commodity trader which was launched with all the razzamatazz worthy of a one-time secretive trader that would make billionaires out of its main directors.

Glencore launched on the markets at 530p and its banking and other backers get the shares away to "institutions" – funds that control other people's money.  Critics said the IPO was at the top of the commodity market and traders flourished when prices were high.

The FT reported on Tuesday that copper has tumbled to a new year to date low. 

Demand for the metal, which is a key indicator for industrial demand, is low. The West certainly is not demanding while China has to cool its otherwise overheating economy.

So where is Glencore now?  Its shares are trading at 449p (but that's better than the 350p it slumped to during mid August).  Yes, Glencore came with wealth warnings during its £37bn float but buyers obviously confused these with a health and safety message of the "care- sharp blade" label on a Stanley knife.

Now for a third fanfare IPO – and this is one where private investors were told to fill their boots by some IFAs. Take a bow, Fidelity China Special Situations, an investment trust launched with a massive publicity blast in April 2010 at 100p.

It came with two magic words to unlock private investors' wallets – China and Anthony Bolton, the hero of Fidelity Special Situations, brought out of retirement to manage the new fund.  There was scant scepticism – after all the IFAs pushing the issue stood to gain remuneration, unusual for an investment trust.

Fidelity's target of £630m was undershot by some £170m but it was bullish – and it could initially support the price.

It said at the time: "The capital raised demonstrates investor confidence in Asia and the China growth story, as well as support for Bolton's return to portfolio management and his contrarian approach."

Now the shares trade at 80p. Where were the warnings (other than the statutory ones contained in the huge IPO documentation)?  The IFAs promoting the issue were hardly likely to be less than ecstatic. And those who were less enamoured mostly failed to warn potential investors on the grounds that dog does not eat dog.

There's obviously no rule that says an IPO is bad news. But the days of "stagging new issues to make a profit early on are over along with the old city adage of leaving something for the next person. When you sell something you want to do it at the moment of greatest advantage – and banks and IFAs alike prefer their fees upfront.

Mindful Money blogger Gemma Godfrey at Credo Capital suggests investors are learning lessons.

She says: "IPOs are being postponed or withdrawn at record rate, have yet to be profitable and the environment looks to be hostile for a while longer

"This year has seen the highest number of global IPOs postponed or withdrawn (215 to be exact, $44bn in value). Ideally profitable for both company executives and investors, more than half the US based companies listed this year are trading below their listing price. The market volatility has made it difficult to price these offerings but also spooked many potential investors out of the market. Fears over an economic slowdown and macro shocks from the sovereign debt crisis etc has led to an exodus of capital and a shunning of IPOs. These risks look to continue and until clarity returns and investors regain confidence, IPOs will struggle."

So will Facebook make it by 2013?  The IPO, with an estimated $68bn price tag, was supposedly set for next spring, now early winter 2012 looks more likely.

Meanwhile, a Mindful Money blog from a year ago is well worth a second look. It was a look at – surprise, surprise – Ocado but more generally at IPOs. Here it is.

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