An idea for getting the IPO market up and running again has been proposed by Todd Dagres, founder and general partner in the
It seems like an idea taken from the sub-prime mortgage market. The idea is to package up a bunch of companies and flog off stock in the whole lot in one go.
This will diversify and reduce risk, and will mean that investors won't have to bother with due diligence because institutional and independent analysis of the companies will be included in the package.
This sounds more and more like sub-prime where investors in the securitised instruments containing loads of mortgages were told not to bother to look at what they were buying because the ratings agencies had stamped them triple-A.
With the US IPO market dried up, with no IPOs at all in Q408 and Q109, this may be a way to get big investors to take stakes in small companies where the time and effort involved of doing the due diligence is not worth the return.
Will it fly? Well it does sound an awful lot like flogging a pig in a poke. And one remembers what the new American President said about the effect of putting lipstick on a pig.
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