[Should I invest in an IPO?]

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loriloo2
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[Should I invest in an IPO?]

Post by loriloo2 » Wed Apr 19, 2017 11:59 am

[Moved into a stand-alone thread from: 29 Year old New Investor Needs help- Vanguard Index Funds --admin LadyGeek]

I'm new to Bogleheads. Would appreciate any comment on new IPO YayYo and whether anyone has looked into investing in it.
I would like to possibly do so if I could purchase it through funds in my Roth IRA. Any discussion on advisability would be appreciated.

ACM4297
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Re: [Should I invest in an IPO?]

Post by ACM4297 » Wed Apr 19, 2017 4:50 pm

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Last edited by ACM4297 on Sun Jun 18, 2017 7:00 pm, edited 1 time in total.

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backpacker
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Re: [Should I invest in an IPO?]

Post by backpacker » Wed Apr 19, 2017 5:45 pm

You might do some hunting around but, as I recall, studies have suggested that IPOs on the whole do worse than the total market. Probably not a bet you want to be taking.

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LadyGeek
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Re: [Should I invest in an IPO?]

Post by LadyGeek » Wed Apr 19, 2017 6:12 pm

Welcome! Purchasing individual stocks would not be a good first move. Please take a look at our approach to investing.

See: Getting started

Consider posting your portfolio in this thread using the Asking Portfolio Questions format. It will make you think about the "big picture" and give us enough information to point you in the right direction.

If you have any questions, ask them here.
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

CurlyDave
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Re: [Should I invest in an IPO?]

Post by CurlyDave » Thu Apr 20, 2017 1:37 am

If you want to set aside a small part of your portfolio as "fun money" and invest in IPOs and other very speculative issues, go for it. But only with a small part. No more than about 5%. The amount you can afford to lose.

AlohaJoe
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Re: [Should I invest in an IPO?]

Post by AlohaJoe » Thu Apr 20, 2017 1:41 am

loriloo2 wrote:[Moved into a stand-alone thread from: 29 Year old New Investor Needs help- Vanguard Index Funds --admin LadyGeek]

I'm new to Bogleheads. Would appreciate any comment on new IPO YayYo and whether anyone has looked into investing in it.
I would like to possibly do so if I could purchase it through funds in my Roth IRA. Any discussion on advisability would be appreciated.
If you have to ask a bunch of anonymous strangers on the internet, then the answer is "no, you should not invest".

TIAX
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Re: [Should I invest in an IPO?]

Post by TIAX » Thu Apr 20, 2017 6:29 am

AlohaJoe wrote:
loriloo2 wrote:[Moved into a stand-alone thread from: 29 Year old New Investor Needs help- Vanguard Index Funds --admin LadyGeek]

I'm new to Bogleheads. Would appreciate any comment on new IPO YayYo and whether anyone has looked into investing in it.
I would like to possibly do so if I could purchase it through funds in my Roth IRA. Any discussion on advisability would be appreciated.
If you have to ask a bunch of anonymous strangers on the internet, then the answer is "no, you should not invest".
On a related note, read everything linked on this wiki and then leave your advisor or whoever recommended that IPO.

Boglegrappler
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Re: [Should I invest in an IPO?]

Post by Boglegrappler » Thu Apr 20, 2017 8:14 am

YaYo is not doing an ipo in the way its normally thought of. Its a "regulation A" filing. If you look it up, and read the filing, they've never had a dollar of revenue (sales). Its a complete start up. They have a no-name accountant, and the total assets of the company aren't even 200k. The website does have a picture of a very pretty girl, though. No one does one of these offerings unless no venture investor will give you the time of day. That should tell you something.

If you do this, you'll have no liquidity to get out, because there'll be no market, probably.

If you choose to do it, treat it like buying a lottery ticket, with worse odds.

My advice is to not do it. Invest in an S&P index fund, or some blue chip names if you must and watch it for a while and read up on things here.

tuna-piano
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Re: [Should I invest in an IPO?]

Post by tuna-piano » Fri Apr 21, 2017 6:44 pm

Summary: This is a terrible IPO, absolutely miserable. DO NOT INVEST IN THIS. The company has no working product, no assets, no technical employees, no users, basically nothing. In exchange for that, they are asking investors for $50 million (before IPO fees, including marketing) in exchange for a small percentage of the company. The management in charge determines their own compensation, as there is no independent directors. In my opinion, there is basically no chance of getting much of your money back if you invest in this company. This seems to me like a scheme that was setup to enrich the management, at the expense of all the investors.

Ramy El-Batrawi, who the SEC previously barred from being a public company CEO, is using new investment rules to get uninformed investors to invest in his otherwise hollow company. The company is airing commercials on CNBC to try and get investors. The funds from the IPO will largely flow to Mr. El-Batrawi.

The offering site: https://yayyoipo.com/
A commercial advertising the IPO: https://www.youtube.com/watch?v=oHblvT_81pk
SEC filings
-Highlights: IPO is for $50mil. Company has $160k in assets, $3k in liabilities, $1mil net loss, $0 in revenue
-https://www.sec.gov/cgi-bin/browse-edga ... ind=Search
-https://www.sec.gov/Archives/edgar/data ... ry_doc.xml[/list]

Company Overview Document
-Shows they expect to grow their revenue from $0 currently to $5B in 2018 (almost fortune 500 in one year!) to $30B in 2021
-https://yayyoipo.com/downloads/YayYo%20 ... .2017).pdf

The CEO, Ramy El-Batrawi
-Charged by the SEC with stock manipulation scheme: https://www.sec.gov/litigation/litrelea ... r19655.htm
-In 2010, he was banned from being an officer of a public company for five years: https://www.sec.gov/litigation/litrelea ... r21475.htm
-A CNBC commentator was also indicted (but I don't think convicted?) in this case, as she allegedly took $1.1mil as part of this scheme
-http://money.cnn.com/2005/02/08/news/newsmakers/smith/
-https://www.sec.gov/litigation/complaints/comp19064.pdf

The company's application:
-<500 downloads on Android (no stats for iOS, but only 2 iOS reviews). Only a few reviews, most saying just that the app didn't work at all.
-https://play.google.com/store/apps/deta ... roid&hl=en
-https://itunes.apple.com/us/app/yayyo/id1142797940?mt=8

Preliminary Offering Circular
-https://yayyoipo.com/downloads/s105434_Yayyo_1aa.pdf
-Page 62 states that if the company raises $50mil in the offering, Ramy El-Batrawi will then own 49.9% of the company (which currently has $160k in assets)
-Page 46 details a share buyback plan for an LLC owned by Mr. El-Batrawi
-"If all of the shares of Common Stock offered hereby are sold, investors in this Offering will own less than 10% of the then outstanding shares of Common Stock, but will have paid over 97% of the total consideration for our outstanding shares, resulting in a dilution of ($6.521) per share. See “Dilution” and “Description of Securities” within this Offering Circular." (IPO price is $8)
Executive Compensation post IPO:
"The Company and Messrs. Davis, Vanech, El-Batrawi and Mark Young are in the process of negotiating the terms of formal employment agreements with the Company for the period beginning in March 2017 and expiring no earlier than September 30, 2017."
"Because we do not currently have an audit committee, compensation committee or any other form of corporate governance committee, shareholders will have to rely on our directors, none of whom is independent, to perform these functions."

retiredjg
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Re: [Should I invest in an IPO?]

Post by retiredjg » Fri Apr 21, 2017 7:18 pm

I have not read the other replies.

In general, investing in any IPO is a gamble and frequently a losing proposition. Invest only what you are willing and able to lose. If you invest $100 and it goes big, you'll have a little extra spending money and some bragging rights. If you invest $100 and it flops, you won't have lost much.

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roymeo
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Re: [Should I invest in an IPO?]

Post by roymeo » Fri Apr 21, 2017 7:29 pm

Q: Should I invest in an IPO?
A: I don't think gambling counts as investment.

Q: Should I invest in individual stocks in my Roth IRA?
A: No.
The sewer system is a form of welfare state. | -- "Libra", Don DeLillo

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BolderBoy
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Re: [Should I invest in an IPO?]

Post by BolderBoy » Sat Apr 22, 2017 9:52 am

Years ago I read that the stock value of most IPOs goes down the next day and either takes years to recover to the IPO price or never does. Sorry, I can't remember the source for that.

I've had 4 financial advisors over the years (ditched the last one in January 2010). Each was in love with investing in IPOs. Each asked me for permission to do IPO investing with some of my money. To each I quoted the first sentence above. In every case, the IPO value went down thereafter and never recovered before I ditched that FA to gamble with another FA.

Bottom line: Don't do it. It is essentially gambling and not investing.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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