iSelect to list on ASX today

iSelect (ASX: ISU) is due to commence trading at midday today after completing its initial public offering (IPO) of shares in the company at $1.85. With the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) quickly falling 1.3% at the open, it’s not a particularly upbeat day for iSelect to list on the bourse. Of course, it is the long-term performance of iSelect which matters to investors who bought into the IPO, although there will be plenty of traders looking for a ‘stag profit’. (A stag profit refers to an IPO which opens above the issue price allowing an immediate profit to be realised.)

Recent IPO’s have provided muted, although not terrible, initial returns for investors. Legal services provider Shine Corporation (ASX: SHJ) has fallen 4% since its listing in May. However the S&P/ASX 200 index is down nearly 10% over the same period, so Shine has outperformed. Fertility service provider Virtus Health (ASX: VRT) which listed earlier this month has seen its shares rally around 5%, while the index has dropped 2% over the same time frame. New Zealand-based Mighty River Power (ASX: WYT) has dropped over 13% since listing, which is unpleasant for shareholders but in context to the index’s 10% fall is not so bad.

Foolish takeaway

Owning a growing company from a ‘young’ age for the long-term can create a lot of wealth, there are a couple of caveats though. Firstly, a young company IPO would normally be looking for new capital to expand – many IPO’s are just a way for current owners to cash out and walk away rich. Secondly, the price you pay matters. Over the years many IPO’s have been priced at extreme levels, transferring all of the spoils to the sellers and leaving none for the buyers!

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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