IPO activity: Bell bottoms
James Wilkinson, fund manager, Thames River.
Winners and losers
The graph shows that 184 property companies were listed on global exchanges between July 2006 and April 2007, of which 71 were in Europe. Based on my experience in Europe, for every company that manages to achieve a listing, one will have fallen by the wayside. And for each attempted IPO, a typical investment bank will have sifted through up to 25 IPO candidates.
IPOs are subject to trends in the same way as clothing. Once we saw the first company targeting investment in India we were sure of seeing five others, and we are currently in the midst of a run of Russian companies that will no doubt continue until the next big thing comes along. This metaphor stretches to pricing. The first companies to come to market tend to get away with higher prices and in the case of the many externally managed funds we have seen, higher fees. As the product becomes more common, prices and fees come down until at last the market is saturated. One might consider that investors ought to discriminate between prospective IPOs on the basis of quality and long-term performance potential.