Investors learn IPO often stands for “It’s Probably Overpriced”

I wrote a post here on LinkedIn in August about the dismal performance of the Honest Company since it went public.

Even the star power of actress and founder Jessica Alba has failed to stop a slide that has seen its IPO price of $16 chopped in half — and a fraction of its 52-week high of $25.

The Globe and Mail published a great article this week that noted many IPOs in Canada have also struggled with more misses than hits.

While IPO has traditionally stood for Initial Public Offering, those who are wary of companies meeting often rosy projections like to say the acronym stands for “It’s Probably Overpriced.”

Personally, I like to take a wait and see approach in investing in publicly traded companies, reviewing filings and documents over the course of weeks — and even months — on websites such as sedar.com that you can access for free.

The beauty of equity markets is that investors have a wealth of choices with the price and valuations of many companies — unlike real estate — disconnected from the general market, particularly in the early stage of their operations.

For every stock you miss or get wrong, the good news is there are hundreds of other companies out there that you can invest in. The key is to take the time to complete your due diligence like any other investment.