Cordell Eminent Scholar of Finance, Insurance & Real Estate
Warrington College of Business
The database of information about initial public offerings, or IPOs, that Jay Ritter started building in 1979 has grown into an essential resource for journalists, investors, scholars and policy makers.
Ritter has tracked so many variables about so many companies — more than 8,500 at last count — that he and his collaborators and students can answer just about any question that arises. Want to know the average first-day returns on IPOs? He’s got it. The fraction of companies with negative earnings? Got it. The number of U.S. IPOs from Chinese companies? Yep.
And because he is able to provide up-to-the-minute data and easily digestible quotes, he is now known throughout the industry as “Mr. IPO.” He has been quoted hundreds of time in The Wall Street Journal, USA Today, Bloomberg Business Week and The New York Times.
NASDAQ defines an IPO as “a company’s first sale of stock to the public. Securities offered in an IPO are often, but not always, those of young, small companies seeking outside equity capital and a public market for their stock.”
Although there are fewer IPOs each year now than in the past, Ritter says the companies going public today are generally bigger and more mature.
“Rather than just being a startup with an idea, these companies have a business model where they’ve demonstrated that people are willing to buy their goods and services,” he says.
Another reason there are fewer IPOs is that many successful startups never do go public, Ritter says. Instead they get acquired by a bigger tech company. For example, Google, has purchased 234 companies since 2001.
Most newly public companies still aren’t profitable, Ritter says, but he argues sales are a better predictor of IPO success than profits.
“Companies that have demonstrated that they have a product or service that people are willing to buy, on average, have been decent investments,” says Ritter.
Ritter says he looks forward to continuing his tracking of companies that could lead the economy well into the 21st century.
“When I started working on IPOs 40 years ago, I had no way of knowing that the IPO market would boom like it has,” he says.