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Past performance weighs heavily for retail IPO investors

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31/03/2014
Barclays Stockbrokers found that research rules for retail IPO investors as past company performance becomes the most important factor in their decision making.

33 per cent of investors relied most on the past performance of a company when deciding whether or not to invest; 20 percent based their decision on the initial offer price and an equal percentage on their perception of a company’s share performance after it floats.

The shift towards past performance has taken place over the last six months, as previous research indicated that clients weighted share performance over past performance.

Chris Stevenson, vice president at Barclays Stockbrokers, said: “Given the growing activity and mounting public interest in retail IPOs, it’s interesting to see past performance increase in priority. While past performance is not a reliable indicator of future performance, we see this as an indication that clients are more focused on researching companies thoroughly before investing in a forthcoming IPO.”

Brand awareness hasalso increased in importance. Just six months ago only 8 percent of investors considered brand name a reason to partake in an IPO; now 18 percent do so. 

Stevenson continued: “We have seen some prominent companies float on the LSE in recent months which has most likely brought new investors to the market. As speculation mounts on potential floats from further household names, the trends we have seen in the last six months are likely to continue.”

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