Paradox -- IPOs

[allalongthewatc]

Hello All,
I am reading CFAI material, which states that IPOs are typically underpriced, wiht the offer price below the market value before the trading begins. Hence, it would make sense to buy a stock at the time of IPO.
Paradoxically, Warren Buffett says “IPOs are almost always bad investments” Source.
Any thoughts on this?
Thanks in advance

 

[lotusunsw]

Warren Buffet also said :
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
I think it’d be more the fact that IPO’s are unpredictable, with all the hype created in the media (especially in relation to these tech companeis), while Buffet has his ‘League of Analysts’ looking into umm ‘stable’ companies with a good track record.

 

[busprof]

Here’s the empirical evidence - The typical FIRST day underpricing is between 7-15%. On average, after the first day pop, IPOs underperform their industry peers by between 5 and 15% over the first year (and similar amounts in subsequent years.
Unfortunately, as an individual investor, it’s harder to get a pice of the action on the most underpriced IPOs - banks typically give much larger allocations of the “hot” IPOs to their best customers.

 

[zachlehner]

I think it is likely a moot point since if you’re working at a company within the industry, you will most likely be prohibited from investing in IPOs. But I agree with busprof statement for sure.