Six investment lessons from ten years of IPOs

Six investment lessons from ten years of IPOs

Executive Summary

In this paper we analyse the data on eleven years of IPOs on the London Stock Exchange. We ask whether there are any common factors behind the most – and least – successful offerings over that time.

Our findings show that the best performing new issues typically start life on the market with a market cap of under £250m, are run by a founder, have no private equity presence at flotation, and list on a sensible valuation. They also went on to deliver double digit earnings growth for a number of years.

Our findings show that investors should be very wary of buying new issues from private equity or participating in ‘hot’ IPOs that float on expensive multiples.

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DISCLAIMER: This document has been prepared by Whitman Asset Management Limited (“Whitman”). Whitman is authorised and regulated by the Financial Conduct Authority (“FCA”), registered number 916792. Whitman has its registered office at 1 Manchester Square, London, W1U 3AB and is registered in England and Wales under company number 11283688. All data has been sourced by Whitman. This document is for information purposes only and is not to be construed as a solicitation or an offer to purchase or sell investments or related financial instruments. This document has no regard for the specific investment objectives, financial situation or needs or any specific investor. Although Whitman uses all reasonable skill and care in compiling this report and considers the information to be reliable, no warranty is given as to its accuracy or completeness. The opinions expressed accurately reflect the views of Whitman at the date of this document and, whilst the opinions stated are honestly held, they are not guarantees and should not be relied upon. Our opinions reflect our views at such time regarding market conditions and other factors, may depend upon assumptions or projections that may not prove to be correct, and are subject to change.

RISK WARNING: This document is intended for use by professional investors and advisors. It should not be relied upon by private investors. Opinions expressed whether in general or both on the performance of individual securities or funds and in a wider economic context represents the view of the fund manager at the time of preparation and may be subject to change without notice. It should not be interpreted as giving investment advice or an investment recommendation. This document is produced solely for information purposes only and may not be copied or distributed without express permission. As of the date of publication of this paper, Whitman has investments in Cerillion, AB Dynamics, Alpha Group, Gamma Communications, Mortgage Advice Bureau, Property Franchise Group, Beeks Financial, Tatton Asset Management, Ashtead Technology, Keystone Law and JTC, as mentioned above. Past performance is not a guide or guarantee to future performance. Investments are subject to risks and may also be affected by exchange rate variations. The investment value and income from them may go up as well as down. Investors may not get back the amount they originally invested. Issued and approved by Whitman Asset Management Limited. (FRN 916792) on 29 November 2024.

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