Many high-tech companies, including Facebook, have consumed massive attention from the public to achieve success, and this is the sole reason why such companies have surpassed all the others. The investors and media play a huge role in the Initial Public Offerings as these two sources are responsible for boosting the struggling companies.
Why do Tech companies appear to be generating the most proceeds?
The report generated by Ernst and Young declared that the tech sector produced the most proceeds of $68.8 billion with the total number of 263 IPO’s while the health sector took the second place in the list. According to the infographic, the history of U.S. accentuates entirely on the Tech companies, which appear to be generating the most IPOs on the list.
Is the hype true or just surface leveled?
The hype, however, is just surface leveled due to many different and accurate reasons. The last decade tells a completely different story regarding the IPOs of tech companies. The record shows that in the past ten years, these tech companies showed poor performance with negative average IPO returns (refer to the chart).
The real reason why a company tends to receive negative IPO is that the trading is at its peak on the first day when the incoming investors are mostly interested in the offer price as compared to the subsequent days.
Why should investors invest in tech companies despite the negative Average IPOs:
On the whole, the investors have now become even more discreet in considering any investment to the tech companies. The only way to ensure a promising return is through analyzing the right company for trading. With over a hundred billion-dollar tech companies, the adjustment to the market should easily be sifted.
Infographic by: Visualcapitalist.com