I happened to see this comment in an email earlier today (thanks, Rob):

About 83% of U.S.-listed IPOs in 2018’s first three quarters involve companies that lost money in the 12 months leading up to their debut, according to data compiled by University of Florida finance professor Jay Ritter. That is the highest proportion on record, according to Mr. Ritter, an IPO expert whose data goes back to 1980. Source: Wall Street Journal

I asked how those stocks were performing this year and here’s the response:

The stocks of money-losing companies listing in the U.S. (in 2018) have gone up 36% on average from their IPO price through last Thursday, according to the article (IPO Market Has Never Been This Forgiving to Money-Losing Firms – Wall Street Journal)

That does happen to be better than the 32% return for IPO stocks with earnings and the 9% gain for the S&P 500 index year-to-date. Amazing? Incredible? Outrageous? Unsustainable?

Managing a DB is not an easy job. Focusing on the ROA as the primary objective has made it more challenging, especially given the greater market volatility needed to cobble together a combination of assets that might just meet that return target. Throw in the fact that low-quality names are leading the market higher makes it even more challenging.  Given this environment, we believe it is critical that DB plans begin to de-risk.