There is a reason why Warren Buffet and Charlie Munger have never bought a new issue (IPO). It’s because they are manufactured investments, orchestrated in such a way that the investor gets the worst deal possible. I concur. The very thought of a group of people who make the optimum amount of money by selling you an investment at the highest possible price just makes my stomach turn. Wind it back to my previous article on Uber Technologies, Inc. (UBER) and the initial sale to the public. The stock took two and a half years to become interesting again. It was one of the highest-level pump and dumps I’ve seen, and I’ve seen a few having spent 30 years in the business.
You rarely see an IPO cheap on a value basis. Usually, I wait until the snap crackle and pop to die out and look in the wreckage of discarded names when they are forgotten about and unloved. Spinoffs are similar investments in that respect, although they are less manufactured and, quite honestly, a better place to dig for gold. However, every now and then an interesting fallen IPO appears with the correct ingredients.
Bring on Airbnb, Inc. (ABNB). Chief Executive Brian Chesky is one of the humblest billionaires on earth. He’s gone from zero to being worth a staggering $1.9 billion in a short space of time. The Co-Founder, CEO, Chairman and Head of Community of the tech juggernaut kicked off the firm’s life in San Francisco 14 years ago because he could not afford to pay his rent. And like most great things, Airbnb was born out of necessity, not greed.