Discussion in 'Trading' started by Dominic, Jul 10, 2006.
Any info on how many years the average company survives until going BK after IPO?
That's not an easy question because an IPO'ed company can suffer many fates that pull it off the radar screen (M&A, delisting, being taken private, etc.) Have you googled terms such as IPO, bankruptcy, survivorship? (if you do this the first hit is http://home.business.utah.edu/actmp/wconf05/DemersJoosFailuresIPOJan2005.pdf and looks like it might be what you want)
It's not clear to me how this data would be useful. On the one hand, the question you ask is very important to risk models and understanding survivorship bias. On the other hand, I'd also argue that the "average" isn't meaningful because business failures cluster in the downturns of the business cycle and during burst bubbles (e.g., look at the high % of dotcoms that IPOed and then cratered in the space of a couple of years). Thus few companies last "the average number of years" because there is no such thing as an average year or an average company.
What are you really interested in knowing?
Thanks for the reply.
What I really want to know is how many companies become public and start trading on the US markets and then have to close their doors down the road.
You didn't answer the question. (The number you're looking for is 89.5%.)
I find it hard to believe that 90% of all companies that become public on the markets close their doors...
A number like 90% is meaningless without a year. Eventually every store is going to get close, after all Gutenberg's printoffice was killed too by the advance of computers....
So you could say, for example: 70% of IPOs weren't traded 5 years later...
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