Wealth Coach: Buying an initial public offering on its first day of trading is probably not a great idea. It’s better to sit tight, be patient and watch how the company’s stock does for the first few months.
Lyft is now trading about 25% below its IPO price because of concerns about how much money it is losing, competition with Uber and underwhelming results in its first earnings report since going public.
Average investors should watch and wait when it comes to a buzzy IPO instead of diving on the first few days, recommends Jim Price, lecturer and entrepreneur in residence at the University of Michigan Ross’ Zell Lurie Institute.
« Stay on the sidelines. These super hot IPOs are institutional investor plays, » Price says, referring to the large mutual funds and hedge funds that are able to buy in to an IPO at the offering price.
Mom-and-pop investors typically have to wait for a stock to start trading before they can buy — and they often wind up doing so at a big premium to the offering price.
Beware the flip
Plant-based burger company Beyond Meat(BYND) priced its IPO at $25 last week but the stock opened at $46 and went as high as $85 a few days later before pulling back to about $68.
