2019 IPO Rush
The IPOs just keep on coming demanding our attention. Unlike the Gold Rush this is not our first IPO Rush. What did we learn from the last cycle and where will all of this new money go? We will examine that question in this week’s blog. I feel like Llyod Bentsen when I write I knew the last IPO Rush and you are are not an IPO Rush. What defines an IPO Rush and how can we benefit.
Money In Motion
Financial advisors try to identify money in motion to increase their growth. Money in Motion is defined by changes in liquidity caused by a corporate event like an IPO. During the last IPO Rush the firms that underwrote IPOs provided introductions to the corporate executives. My firm, Montgomery Securities, provided 100 IPO introductions in a single year. These 100 introductions were mandated to be made to advisors that coordinated with the trading desk and the outsourced money management division. The introductions benefitted the firm and also helped advisors create large businesses. The current IPO Rush is slightly different and advisory firms must leverage their contacts to gain an audience with the newly minted millionaires. Since many of these corporate executives are young and don’t trust established financial services firms playing your fiduciary card should be helpful.
The Next Amazon
The current roadshow for Uber is trying to position the firm as the next Amazon. While this sales pitch may glean IPO investors it has proven to be difficult to achieve. Before Amazon many new companies wanted to be the next Microsoft. Unfortunately there is only one Bill Gates and in addition to IPO investors selling this belief to your employees can create a false sense of security when they are deciding if they should sell their stock. An experienced advisor or a friend who has been part of an IPO can help. There are no definitive answers but there are definitive mistakes.
Shirtsleeves to Shirtsleeves
The immediate wealth creation of an IPO is a double edged sword. Wealth needs to be diversified and family members need to be educated on how to adapt to their new found visibility. That restaurant deal sounds great but you need a trusted foil to prevent you from irresponsibly spending your new wealth. New IPO millionaires are not the first to experience new wealth. Wealthy families have given us a good road map. Philanthropy is an enduring choice but frivolous spending and investing is more fun. If we don’t educate and monitor our wealth then we can end up squandering it like the generations before us did. The warning of wealthy families going from shirt sleeves to shirtsleeves in three generations still rings true. Find an experienced advisor to help you keep your sleeves.
The tools on the Gold Rush were picks and shovels. The tools from the 2019 IPO Rush should be Fintech tools.