Corporate Insiders Know When To Go Public

For anyone who has ever considered investing in an IPO, the data from Jay Ritter at the University of Florida may give reason for pause. The blue bars show how much the average IPO goes up from its offering price to its close after the first day of trading. The orange line shows how much those same stocks outperform/underperform the market in the ensuing 3 years (excluding the first day’s return).

IPOs are good if you can get in on the initial offering, but don’t expect outperformance in the years afterwards. The cynic may look at this chart and determine corporate insiders know exactly when to offload a company to the public.