Hamilton Lane Inc. is a global provider of private markets investment solutions with $292 billion of assets under advisement and $40 billion of assets under management. The company works with its clients to build out, conceive, monitor, structure and manage portfolios of investments and private market funds. It has 290 employees working in 11 office locations in the U.S., Tel Aviv, London, Rio de Janeiro, Seoul, Hong Kong and Tokyo. The company offers a menu of different investment solutions for its clients, including customized separate accounts, specialized funds, advisory services, distribution management and data analytics. The company was founded in 1992 and is based in Pennsylvania. In February, the company decided to file an IPO which is the way a corporation can be listed on a stock exchange and transition from private ownership to a publicly owned entity.
This announcement and the flurry of high profile IPOs this year has made investors excited to put money into new companies on the market and buy the shares the day they come out. However, does this really make for a viable long term strategy for investing? Often times the stock may have violent fluctuations at the post launch period, but the price settles in and may not even increase after the first people buy their shares in the launch. Snapchat for example launched at around $20 and has remained flat ever since with little movement upwards. This shows that the initial valuation was high and now the upside is very limited for the company at the present post IPO
Likewise, would it be smart for a beginning investor in college or the early phase of investing to put money into a volatile but potentially growing company? Based on this evidence, I would argue that No it does not make sense to try and derive value from these stock IPO launches such as Hamilton Lane. While they have hype and potential, often times the price is pushed so high before the public stock release that the gains and upside are eliminated if people pile into buying shares. Since Hamilton Lane was a quality company that has existed for years and has an established revenue stream, the ability to judge the value of the company was very accurate and high. Below is the stock price since the IPO and it shows that the analysts who valued the deal indeed did know the price that should be paid in order to prevent huge spikes in the share price.
IPO’s can be looked at as the potential for a quick profit. However, you do need to make sure that the market conditions are right for a brand as well as make sure that the price and valuation are not overblown, causing you to pay more than a stock is worth.