LGIM's Penny: Be a bear of IPOs and a bull of unloved bid targets

The message at this stage of the economic cycle, or any stage, is 'buyer beware'.

In recent times, UK corporate financiers have been very busy. We have seen myriad IPOs, new issues and quite a number of takeovers. Yet our call is 'be a bear of IPOs and a bull of the unloved, under-researched bid targets that languish in the depths of the UK market'. IPOs are highly lucrative events for stockbrokers, company managements and other private equity sellers. Yet the academics consistently tell us in the US and the UK that after the first day of launch, IPOs tend to underperform the overall market. In preparation for a launch, many believe businesses are managed aggressiv...