Time to Question IPO Motives and Risk

I hope the Securities Exchange Commission is more cautious in evaluating and granting private companies “ public” status, than lenders were with the mortgage industry. I am seeing more Initial Private Offering from private investment companies. Divisions of companies are being separated from parent companies and offered as IPOs. The categories of some of the IPOs are also difficult to define. Some but not all areas effected by mortgage fallout are investment, insurance, and home improvement retailers. A fellow researcher asked about the purpose of an IPO. Talk about a delayed fuse, I did not give it a serious thought at the time. I answered the question, “Raise capital and distribute risk”. I was deep in other research and resented the distraction.

Stocks should come with a warning similar to other age or size restricted products. “If you are born after this date” or to “To get on this ride, you must be this tall”. I would be extremely suspicious of any company IPO within the past 18 months. The IPOs value would be derived from record high net incomes reported in 2005 and 2006 for the application. Timing would be critical. Their application would need to be submitted for net income during the peak of the boom and not have time to address the risk or show a loss.