Risk of a hype-based rally based on uncritical media reports of “pro forma” earnings is much larger. Usually boosted by “analysts” whose banks want to so the followup offering when the “profitable” company burns through its IPO cash.
I also think the “lockup period” price decline is a little overblown too. It does happen, but IPOs are usually much larger than post lockup insider sales.
Also, the normal thing for IPOs these days is to have a big element of insider sales directly to the pocket of insiders, not new shares and capital to the company. Some IPOs are more than 50% insider sales. So they don’t need to suddenly cash out at the lockup. Maybe some low level people who have stock options, but that’s a small thing.
In summary, I’ve done well for 21 years now shorting purely on valuation and ignorance non-fundamental issues like squeeze risk and lockups. If I were a pro I’d probably consider them slightly.
