Why IPOs are best avoided

In an IPO (initial public offering), the odds are stacked against you. The seller has more knowledge than you do. So why bother?

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Footasylum: not a great advert for going public
(Image credit: Credit: geogphotos / Alamy Stock Photo)

In November last year, sportswear chain Footasylum made its stockmarket debut at a share price of £1.64. On the day of its initial public offering (IPO defined here) the price surged by more than 20%. The firm had a solid pedigree it has been around since 2005 and was set up by the founders of JD Sports, a successful business in the same sector. Yet this week, following its second big profit warning in four months, the share price sits at below 40p, after shedding more than 50% on Monday alone, when the firm warned that profits would be well below the £12.5m it made last year.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.