Affinity and Vocation’s shares rise on listing

The supply of new investment options continues this week with two more businesses, Affinity Education Group (ASX: AFJ) and Vocation (ASX: VET) joining the bourse today via initial public offerings (IPO).

Affinity is a provider of education and care to children ranging in age from six weeks to 12 years of age through long day care, before and after school care and occasional care in the markets of Queensland, New South Wales and the Northern Territory. Its services put it into competition with fellow listed child care provider G8 Education (ASX: GEM). G8 has provided an outstanding performance to shareholders over the past few years with the share price rising 235% in the past three years compared with a gain of just 12% from the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO).  No doubt investors in the Affinity IPO are hoping that the firm can mimic G8’s success.

With Affinity’s float price set at $1, the opening hour saw the shares trade as high as $1.10 before retreating to be up $1.02 in early afternoon trade.

Meanwhile Vocation which is a provider of vocational education and training and is being created by bring together three “established private providers” has raised $253 million at an issue price of $1.89. Just as Affinity shareholders will likely make comparisons with G8, Vocation shareholders are likely to compare their business with Navitas (ASX: NVT). Navitas has also been an outstanding performer with its stock price up 53% over the past three years and hence also significantly outperforming the index.

Investors appeared keen to snap up stock in Vocation with the shares up 8.5% at $2.05 having risen as high as $2.12 or 12%.

Foolish takeaway

For investors who either chose not to take part in these two IPOs or who missed out on allocations, there can often be a feeling of regret when they see the “stag profit” others have enjoyed. However, given the limited historical financial data of these two offers, caution may be the more prudent approach.

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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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