IPO Analysis Part 2: “D” Listers, Frauds, Buy-Outs and Nomads

Friday, Jul 05 2019 by

Summary of Part 1 and Part 2

From a quantitative analysis of 541 IPOs floated on the UK market between 2011 and early 2019, the data shows the following:

  • 67% have lost money to date with a median loss of -57%: over 10% delisted with a total loss
  • 33% were in profit: with a median return of 60%
  • 8.5%  (46) were bought-out where 60%  returned a median profit of 31% while the remaining were sold at a loss of -25.5%
  • Year 1 performance post-placing tends to be overwhelmingly profitable even for shares that go on to delist.
  • Evidence shows that the annual listing cost of £200K+ on AIM is a major driver for delisting when liquidity and share price performance is poor
  • IPOs with strong growth and long-term potential rarely sell-off and tend to outperform over the period studied: the converse is true for those which delist

Given the typical profitability and chance of total loss, the data shows that IPOs do make good trades with a 25% stop-loss from the IPO placing price yielding profits in Year 1.

Post Year 1 a stop-loss of 25% retains 80% of the longer-term winners and retains the 10% that go on to make high returning investments with a median profit of 190%. The same stop-loss removes 93% of the losers and 100% of the total losses. 

                          A pdf download of this article is available at  https://runprofits.


Part 1 of this series featured a quantitative analysis of 408 IPOs listed between 2011 and 2019. There were a further 133 IPOs which eluded the datamining processes used in Part 1. Part 2 takes a look at these 133 missing IPOs: almost half had delisted, one third were bought-out while others had changed names, changed markets, gone back to private companies or were frauds. 25% of the 133 yielded a profit while 75% were a loss. These results amplifiy those from Part 1 and confirm the underperformance of IPOs and the risks of total loss of capital owing to delisting.
The costs and effect of being listed are cited by C suite executives as exacerbating difficult trading conditions resulting in delisting. These are broken down further with insights on returns and the aggregate view of the total 541 along with observations on IPOs in general 

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14 Posts on this Thread show/hide all

JohnEustace 5th Jul 1 of 14

That’s a fascinating account with much to be learnt from it. Thank you for putting all the effort into producing it. I will read it again over the weekend.

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tombuz 6th Jul 2 of 14

Excellent article. I had not realised just how expensive and precarious a listing on Aim can be.

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brucepackard 8th Jul 3 of 14

This is really great! Thanks very much. One question on Naibu:
"The non ex directors are alleged to have walked off with £150m while their Nomad Daniel Stewart was at the receiving end of litigation."

Is this a typo? Is there a source? £150m is a huge amount!

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JohnEustace 8th Jul 4 of 14

In reply to post #490731

It was £150m allegedly but I don't think it was the Naibu NED's who got the money, at least not UK based ones.

"The non-executive directors of a Chinese sportswear company, whose founder and production boss both vanished along with £150 million, are weighing a lawsuit against the City advisers who floated the firm on AIM"

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FREng 8th Jul 5 of 14

Thanks - a very useful analysis.

You have analysed the performance from the IPO price. Have you looked at the performance for anyone who bought on day 1 after the IPO - say at the closing price for day 1? That would be interesting for those of us who don't have pre-listing access to many IPOs.

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Whitbourne 8th Jul 6 of 14

Why on Earth does it cost £25k to issue an RNS announcement, as stated by 'CEO of Event Management business'? That seems disproportionate. Is anyone able to validate that figure?

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dscollard 8th Jul 7 of 14

In reply to post #490731

Danierl Stewart got sued for it so it  may well have been instumental in their downfall. Quote is from the legal briefs as I am not keen on giving opinons on litigation

Paul Scott did some indepth analysis so it should be in an SCVR from around then

Website: runprofits.com
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dscollard 8th Jul 8 of 14

In reply to post #490836

Agreed but I don't think it as just an RNS cost but the cost from their Nomads which could have included PR costs etc : it is lifted from a UK Government report. Below is the reference I lifted the quote from

Ref 2 : Dep for Business and Innovation Skills Paper No 126: Investigation into the motivations behind the listing decisions of UK companies, Aug 2013

Website: runprofits.com
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dscollard 8th Jul 9 of 14

In reply to post #490766

all of the data used in Part 1 can be accessed at
Click on Open Report in the Artcle  will launch the data report which is full interactive 
(uses Microsfot Power BI but it is pretty intuitive)

The base data includes the Open Price for the first trading day , I didn't mine for the Close Price and  I have canned this piece of work as it took a lot longer than I had planned but was fascinating to do at the time

below is a partial  grab of the data 

Website: runprofits.com
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Gromley 8th Jul 10 of 14

Excellent add on to the first (excellent) article ds.

[For the avoidance of doubt - I like it ;-) ]

One thing you covered in the first article was that the majority of stocks seemed to have their best performance in the first year of listing and on average beyond that performance was less positive.

Implicitly your information on when the 'high points' were reached suggested that (share price) performance deteriorated over time - at least for the first four years.

Given that you study 'only' covers 8 years of IPOs, I wonder how many are still in their early years and therefore may in fact be making your analysis of outcomes overly optimistic?

(I was particularly prompted towards this question by a post today on SCVR - describing a company as one of the "good" IPOs - given the company only listed scarcely listed 6 months ago, this seemed quite premature.)

Another consideration that would be of interest (although possibly quite hard work to determine) would be any split in performance between 'young' companies and 'well established' companies. The latter camp I would imagine (possibly wrongly) would be dominated by previously listed companies taken off market by Private Equity to be later relisted after being rescued - but often pumped full of debt (and often relisting at a time when the markets are bubbling with confidence).

I'm not sure that I feel particularly positive about either group to be honest, but they are very different propositions and it would be interesting to understand whether there is any difference in general outcomes.

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dscollard 8th Jul 11 of 14

In reply to post #490886

Given it is 541 companies it is a mile wide and an inch thick though that was the original intention.

As you say not only is there only 8 years but there is a distribution of ages within it so the IPOs are at different levels of maturity.

If I do a Part 3 ( Part 2 was tricky and overly time consuming) I'll probably sub segment into the very best and worst to go deeper on each segment and see if any commonalities arise (level of debt is probably a big one). That might allow a checklist of what a “good IPO” starts to look like
On outperformance in Year 1 and subsequent years: one commonality with the best performers is that they had/have super momentum which was conserved . Most never reverted to the IPO placing price or below. This has the basis for a rule which doesn’t need the left side of the chart as it sets the conditions for the right-hand side
I’ve let the data lead this one so I invite robust challenge: I literally don’t have a dog in the fight

Website: runprofits.com
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Richard Goodwin 14th Jul 12 of 14

Thank you immensely @dscollard. You have made me a wiser investor.

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dscollard 16th Jul 13 of 14

Albert Technologies (LON:ALB) adds itsellf to the "D" Listers

IPO'd in Nov 2015 at 133p

Currently at 2.5p having opened down over 80% today  the directors comment on Albert Technologies (LON:ALB) progress and cite its listing on AIM as "negatively impacting the company's business"

They've run out of money and the collapse in share price doesn't make for raising much through placings

It's another Israeli tech company gone bad 

"To support further growth, it will be necessary to seek additional funds and the Directors believe that it is in the best interests of the Company to secure a strategic or financial investor with knowledge of the company's core markets, who can assist the Company with accelerating the distribution of the company's proprietary technology, expand its revenue growth and increase its market penetration in the enterprise market. 
Lisa Gordon, Chair of Albert Technologies, said:
"The Directors believe the current market valuation does not reflect the Albert's market opportunity, the value of its technology, its current and potential client list, and the overall progress we have made in the enterprise market in the last two years.  On the contrary, the Board believes it negatively impacts the company's business, its potential for growth and our ability to raise necessary further funding through the public markets is significantly constrained. As a result, we do not believe that remaining listed on AIM is in the best interests of the Company and its shareholders".

Website: runprofits.com
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Whitbourne 20th Jul 14 of 14

In reply to post #490861

Belated thanks for the reference to the Government report, dscollard - and for the great work that went into these articles, which is much appreciated.

The report is worth reading (only a few pages are about listing) and is available to download from https://www.bl.uk/collection-i...

Below is the source for the £25,000 figure to issue an RNS however the sample size is three companies and only one of these was on AIM, So I'd want to know if this reflected individual circumstances. As dscollard says, this must be an all-in cost including legal vetting and PR support.

The cost of failure in the AIM market is considerable; emergency reporting costs of £25,000 per report (on top of annual operating costs of c. £250,000) may be unsustainable and lead to an exit, with costs to find new buyers (c. £300,000)

Some other quotes that sum it up well:

For these companies [that chose to de-list], operating privately offered a more stable environment with greater focus on managing the business, rather than managing the markets.
The main perceived deterrents to listing were:
-  the time and cost - AIM was considered as ‘expensive to enter and manage’;
-  the burden of additional reporting;
-  concerns over directors’ reports (e.g. salary disclosure); 
-  short termism and not knowing your investors.
All respondents reported that they preferred managing the business without the distractions of the market and that time spent reporting to and managing the market can be to the detriment of managing the day to day operations of the business.

Management at two of my holdings Sosandar (LON:SOS) and Van Elle Holdings (LON:VANL) might echo that. Sosandar just listed too early in its development (in my view) and Van Elle was a well-established private company that received investment from BGF (the vehicle that invests in small business equity, owned by the big UK banks) and listed in part to provide an exit. Both sets of management would probably say that markets focus too much on the short term, which is why the share price can be irrationally high or low depending on recent newsflow that does not change long-term prospects.

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