BusinessCorporate FinanceIPO does not guarantee profits rise

IPO does not guarantee profits rise

A study by Ernst & Young has found that only 39% of companies increase their profits after going public.

Link: Firms predict sector revival

E&Y said the first year after flotation was particularly bad for profits as expenses associated with the IPO hit companies’ bottom line.

Sales, however, had increased in 82% of the 200 companies surveyed, following their IPO.

David Wilkinson, E&Y IPO leader said: ‘Flotation has not brought the immediate success that many companies would have expected or indeed promised in the over optimistic environment of 2000. Not all the companies that made it onto the market were fully ready either in terms of a robust enough business model or having the critical mass to float.’

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