Identify the right IPO

When I missed the opportunity to buy some Google or VMWare shares during their Initial Public Offering, I was all bombed out since I did had chance to buy some. Now worry no more. The GigaOM has article 5 Tips To Spot A Hot (or Not) IPO by Kevin Kelleher. He relays 5 great tips to look for to identify plausible the big money making opportunity. Here's the quote of 5 tips:
  1. Pick your key stats. The first thing I
    always look at is in the financial table up high: Does the company have
    an operating profit and, if not, are the losses growing dramatically?
    Some companies go public with losses and do just fine; but more often
    they don’t. Then I check revenue growth rates. Then, a bit further
    down, I look at operating cash flow, and whether that’s growing.

  2. And finally, a rough idea of potential valuation: Often the company
    will put something like a “proposed maximum aggregate offering price”
    on its first page to estimate its registration fees. Divide that by the
    most recent 12-month revenue figure. If it’s more than 8-10 times
    revenue, that’s not great. These help give me coarse picture in a few
    minutes. Your mileage may vary.
  3. Compare new filings with old ones. The “risk
    factors”, “legal proceedings” and “management’s discussion of
    financials” are all important sections, but can go on for pages.
    Comparing the most recent S-1 filing with the original will highlight
    changes that were made in the interim - often at the request of lawyers
    or the insistence of the SEC.You’d be surprised what can come out in
    the highlighted text. I use Microsoft Word’s “compare and merge documents” command, which is kludgey but does the trick. If anyone has a better alternative, please speak up.
  4. Examine the margins.
    Once a company goes public, investors will be scrutinizing whether
    profit margins are rising or falling, so you might as well get a head
    start. There is often a table listing expenses as a percentage of
    revenue, letting you see in a few seconds whether costs are falling,
    and whether margins are rising.If margins are falling, it’s not
    necessarily bad. R&D or marketing costs might be up to plant seeds
    of revenue growth. Look in the management’s discussion to see if you
    buy the reason why. If all costs are up as a percent of revenue, that’s not good.
  5. Follow the money being raised.
    This can be found in the “use of proceeds” section. It’s like the “how
    I will change the world” speeches at beauty pageants. Normally a
    company will say the funds will go to possible acquisitions and general
    purposes like hiring and R& D. The more detail there, the better
    the chances that there’s a focused strategy in place.Recently, some
    companies have used most if not all proceeds from their IPOs to pay
    existing investors a big fat dividend. That’s not necessarily a sign of
    a bad company (VMWare did it) but if it happens with a company that has
    a lot of other red flags in its S-1, it’s a clear warning.
  6. Check out the bosses’ pay.
    Steve Jobs may draw a $1 salary and Larry and Sergey may insist on no
    salary, but they are exceptions. Top executives at companies trying to
    go public often draw between $200,000 and $350,000. Salaries above
    $500,000 - and especially $1 million - can be a warning that managers
    are only in it for the money. Look at the compensation tables in the
    S-1.Another bad sign can be insiders selling the majority of their
    pre-IPO shares, or insiders selling more aggregate shares than the
    company itself is. Still another bad sign is an eleventh-hour plan to
    issue millions of shares to board members and executives right before
    the offering. These can be harder to spot.

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