When to buy into a company flotation

The market for new company listings is getting heated again. There is the £36bn flotation of Glencore in London - and 31 firms filing to go public in the US in April alone. The key question for investors is, should you join the rush? Tim Bennett investigates.

The market for new company listings is getting heated again. Stealing all the headlines just now is an absolute whopper the £36bn flotation of commodities giant Glencore in London. In America, Chinese Facebook look-a-like Renren successfully debuted for $743m, while the owner of Dunkin' Donuts fancies its chances of raising $400m. All told, 31 firms filed to go public in the US in April alone. The key question for investors is, should you join the rush?

By the time many investors hear about an initial public offering (IPO) it's often too late to secure a piece of the action. That's because the initial offering of shares by the firm to a wider public market is done largely in secret, behind closed doors. That's partly what the investment banks advising and assisting Glencore are getting paid £264m in fees to do. One key job is underwriting since the point of Glencore going public is to raise cash for further investment in expanding its commodities business, someone has to guarantee to pick up any shares that fail to sell.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.