Nobody is ever going to get rich by buying into IPOs

In Wednesday's blog, I wrote the following:-

 "I would argue that nobody is ever going to get rich by buying into IPOs"

Today a company called Bagir Group, which recently listed on London's Aim market, provided the perfect illustration as to why I avoid IPO's like the plague.

Bagir Group has barely been listed for more than a year. On the first day of dealings the share price stood at over 60p, but quickly lost value. After the release of today's interim results the share price has plunged even further, and currently languishes at 3.75p.

So what exactly has caused today's plunge? In short, losses of over $3m coupled with this trading statement:-

"The Company has made good progress in developing revenues to replace its previous largest customer during the six months to 30 June 2015. However, as noted above, the Company expects the second half of the year to be more difficult than the first half due to competitive pressures and the deferral of sales planned for 2015 into 2016. As a result, the Company expects trading for the second half of the current financial year to be significantly worse than the first half. "

Now using ADVFN's figures the group has a current market cap. of £1.9m. The company describes itself as a designer, creator and provider of innovative formalwear tailoring with it's Head Office based in Israel.

Last reported revenues came in at £97.0m and so ultimately with a £1.9m market cap. it may turn out to be bargain of the century from these levels, and some investors may wish to stick it on their monitors and carry out some further investigation into the company's fundamentals.

Personally, if the recent listing wasn't enough to put me off in the first place then the fact that it's Head Office is overseas certainly would.

I love seeking out and buying interesting micro-cap companies listed on Aim that look good value, but overseas based recent IPO's I wouldn't touch with a barge pole.

Actually, if you had shorted each and every foreign based IPO that listed on Aim you would have made an absolute fortune.

As an aside I often hear investors heavily criticising the Aim market almost as if it's rotten to the core. Of course, it's no such thing. Like any other market there are good, bad and indifferent companies, and if you look hard enough you can find some absolute gems. However, you do have to wonder how on earth so much rubbish appears to have made it onto the market?