Hot IPO or catch a cold?

GLENCORE - HOT IPO OR CATCH A COLD?

The recent announcement that secretive global commodities, mining and production group Glencore International AG is considering a huge IPO via the London Stock Exchange has had a predictable result - my inbox has been flooded with offers of meetings with research analysts from the nine investment banks involved in the deal, with the implicit threat that not showing any interest may result in a poor allocation when the shares are listed.

However, as noted by Ben Graham back in 1973 in The Intelligent Investor, all investors should be wary of new issues – which means, simply, these should be subject to careful examination and unusually severe tests before they are purchased. There are two reasons for this double caveat. The first is new issues have special salesmanship behind them which calls, therefore, for a special degree of sales resistance. The second is most new issues are sold under “favourable market conditions” – which means favourable for the seller and consequently less favourable for the buyer. Indeed, hist...