Somewhat recently, Jim Mungofitch pointed out that, on average, IPOs might be one of the worst investment around. I wanted to look into it, so I scraped all IPOs for the last twenty years. If I just look at pricing for these stocks from currently available yahoo data, a bit over half of them still exist using their original symbol. Some went belly up, some were acquired by another firm, some changed their symbol. So what to do?
I’m wondering about using GTR1, one of the best survivorship-resistant datasets in existence, but have a number of questions.
Is there a way to add your own indicator to the database? This would not only be helpful here, but for many other uses I could envision. (A VL timeliness replacement, a machine-learning based indicator, etc.)
I have original IPO symbols, but don’t necessarily know the current symbol. For example, “ABY” IPO’d on June 6, 2014. At some point, it changed its symbol to “AY” which it continues to use to this day. GTR1 knows about this, because it has the proper history back to the original IPO. My IPO database only knows the original symbol “ABY” which causes a GTR1 error. (Using “AY” works properly.) My question is, can I enter a historic symbol into GTR1? Or can I ask GTR1 the current symbol for a historic symbol?
I see “dsio” in GTR1 for days since investment opened. Is there any field or method I could use to determine if it was an IPO?
Any other thoughts on how I could create a test on how IPOs have fared over time?
Any other thoughts on how I could create a test on how IPOs have fared over time?
If you SIP database all companies have a company id which stays the same regardless of ticker change.
Not the best solution as SIP data until the last few years was weekly or monthly way back.
7987884 EEF42 ABY Abengoa Yield PLC M United Kingdom 40 2014-06-20
9259036 EEF42 ABY Atlantica Yield PLC M United Kingdom 23.48 2017-11-10 Last
10764577 EEF42 AY Atlantica Sustainable Infrastr M United Kingdom 33.06 2022-04-14
They find that between 2010 and 2020 most were losers after 6 months and much worse after 3 Years.
Looking at the decile performance, Chart 4, the average return after three years was about -6% compared to the market. If the markets were up an average of 10% per year that would say the average 3-year return for the IPOs was 24%.
Do do better than the market you would need to pick and choose your purchases. Chart 5 shows that by far the best performing companies had sales over $100 million and were unprofitable for the 12 months preceding the IPO.
3. I see “dsio” in GTR1 for days since investment opened. Is there any field or method I could use to determine if it was an IPO?
dsio is days since a corporate event such as a merger.
dspo is days that a price has been available.
From the gtr1 glossary:
“The field function dsio is useful for filtering out investments with events (such as mergers or acquisitions) in their recent history that would perhaps make the values of other fields not useful or meaningful.”
“The field function dspo is useful for filtering out investments whose underlying stock has perhaps not been trading long enough for the values of other fields to be useful or meaningful.”
Command Translation
Define {MIpostsBase}
step0: [Security Type; lag=1 days] == 10,11,12,18,30,31,48
step1: [Mkt Days Since Security Opened; lag=1 days] >= 253
step2: [Average dollar-volume over 63 days; lag=1 days] > 0
step3: [Average dollar-volume over 63 days; lag=1 days] Top 50%; Cash When None
Holding period = 21 mkt days
Frictional loss of 0.4% applied to all sales (closing long/opening short)
Equally weight new positions, fully rebalancing all liquid positions to equal weight every 1 holding periods
All trades at market close.