Billionaire investor Ken Fisher, founder and executive chairman of Fisher Investments, has a warning for investors looking to scoop up shares of some high-profile newly public companies.
“IPO means it's probably overpriced,” Fisher said. “They're done for the benefit of the issuer and the investment bank. And therefore, they're at pricing favorable to them, not favorable to the buyer. And the aftermath history of IPOs has always been inconsistently terrible after being public.”
Lyft (LYFT) is a prime example. The stock reached as high as $88 a share on its initial trading day last month but a few weeks later, the stock dropped below $56 a share and has yet to meaningfully recover.
Meanwhile, Fisher also points to what the recent parade of IPOs say about the broader stock market.
The fact that it has taken so long for Lyft and Pinterest (PINS) to go public is “fundamentally bullish” for stocks, according to Fisher.
“As John Templeton famously said, ‘Bull markets are born on pessimism, grow on skepticism, mature in optimism, and die in euphoria,” Fisher said. “And it's in that optimism to euphoric stage where you get the pricing potential for IPOs to go public at high prices.”
Other big IPOs expected this year include ride-sharing giant Uber, which has been rumored to be seeking an IPO for years.
Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.
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