Business

Waiting to jump into Twitter IPO could lift profits

Investors who wait a week to buy into a hot tech IPO could boost their returns by more than 60 percent, research by The Post reveals.

In seven of nine initial public offerings, including Amazon, Google and Zynga, it proved beneficial to wait for the frenzy to burn off, according to the analysis.

What’s more, in the case of that basket of nine IPOs, you would have boosted your portfolio by nearly $129,000 by waiting for the rush to pass.

The gain is the result of comparing the price of the first trade of the IPO to its closing price after five trading days.

The pre-trade price was not used because few Main Street investors have access to those shares.

Shares of Facebook, Amazon, LinkedIn, eBay, Pandora, Zynga and Groupon each fell after five days, while Google and Yahoo! rose.

For the most part, patience pays off.

For example, $1,000 invested in Facebook at its opening price of $42 a share in 2012 would be worth $1,168 today. Folks who avoided the chaos, on the other hand, could buy the stock for $33 a share a week later, resulting in a stake valued at $1,493, or 28 percent more than at the opening.

The strategy works even when it comes to money-losing game maker Zynga.

Investors who put $1,000 into the online game maker when its shares opened at $11 in 2011 would have just $338 today. By contrast, folks who waited a week to buy at under $10 a share would have lost 16 percent less.

The biggest advantage in waiting came with Amazon’s 1997 IPO. After one week, the price eased to a split-adjusted $17.13 from its debut at $29.25, translating into a 75 percent advantage.

Waiting is a strategy that savvy brokers use for clients, as well as disciplined fund managers who don’t have access to pre-IPO prices.

Of course, getting stock ahead of an offering is usually the best way to make a pretty penny, but that option isn’t available to most investors, especially moms and pops.

Even Global X Funds, a family of exchange traded funds in New York City, waits a week to buy stock for its funds, said Chief Executive Bruno del Ama.

The firm bases this practice on studies it has conducted showing that waiting a week results in prices that are “more reflective” of a company’s long-term value.

As a result, the firm’s Social Media ETF will be among those avoiding the frenzy of Twitter’s IPO on Thursday, when “speculators” and other short-term traders lead the charge, del Ama said.