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IPO Update & the High-value Option for Financial Planning – Episode 5

In an update to a recent episode about initial public offerings, I talk about why my opinion about IPOs hasn’t changed by discussing two recent IPO examples.  Then, I'll describe why it's important for my firm to be the high-value option for financial planning by telling a story about a recent conversation with a prospective client.

I want to take a quick second to say thank you to those that have subscribed, shared and liked our posts so far, and given us a 5-star rating on our new mini-podcast.  I appreciate it and it helps us pop up in search results so others can find us, and we can help them find answers to financial questions they may have. 

Listen to Episode 5 Here



You can also listen on your favorite podcast app. 



IPO Update

As I mentioned in a previous podcast episode, IPOs aren’t for me, and I don’t advise my clients to partake.  I would never say never; if an opportunity arose where we had access to an IPO where we could have an edge in a situation then I may say “yes, let’s do this.”  

But for the most part, we will be staying away from IPOs.  

Some crazy developments have happened this past week or so that sort of cement my thoughts on the topic.

Example 1: WeWork

This past week, WeWork, a real estate company that provides shared workspaces, was supposed to have an initial public offering where they were selling shares that valued the company at $47 billion.  

A one-year history of investment banking valuations for WeWork were as follows:

  • JPMorgan: $63 billion 
  • Goldman Sachs: $96 billion 
  • Morgan Stanley: the highest estimate at $104 billion 

WeWork’s S-1 (which is what a company files with the SEC in order to have an IPO) was $47 billion 

The final price they listed before they postponed the IPO was $15 billion, and some are saying it isn’t even worth $10 billion.  

Can you imagine if you were a client of these big, well-known, fancy firms and you were sold these shares at a market value of over $100 billion, and then a few months later they crater to 1/10 of the value?  

Example 2: Peloton

Another company is Peloton Interactive, Inc., a fitness company whose main product is a luxury stationary bicycle that allows users to stream spinning classes in the company's fitness studio through a monthly subscription service for around $2,000. 

To me, it sounds like a spin bike with an iPad on it. But in all fairness, I haven’t seen one in person and they certainly have a group of hardcore advocates.  So, more power to them….

Peloton had its IPO last week, and today its shares are trading 15-16% below its Wednesday IPO price.

Now this doesn’t happen all the time, but it certainly shows my point that the hype and hoopla surrounding some of these companies can certainly blow valuations out of the water and can leave clients holding the bag.

High-value Option for Financial Planning

Just the other day, I had a meeting with a new prospective client. 

In his initial contact with my firm, he mentioned he was a couple years from retirement and decided it was time to get everything in order, for his time after he leaves his current job.

He and his wife have done a decent job diligently saving and accumulating their nest egg for this time in their lives, and he was, understandably, looking forward to it.

He mentioned that he had been reading, researching and trying to figure out where they stood in terms of expenses, income, Medicare, and LTC and decided there were so many moving parts that he wanted to reach out and find someone to delegate to and just let someone else worry about all of it. 

I said, that is exactly why we’re here!  

He then asked about our fees, and I explained our fee schedule and that we are not trying to be the lowest priced, robo-advice call center, and that we certainly aren’t even close to the most expensive financial planning option out there. We strive to be the highest value financial planning option, and we provide multiples in value relative to our fees.  

He said, “It seems worth it to me, so I don’t have to worry about it!”

This is our job, to provide peace of mind to you, knowing that a professional is looking out for your interests so you can live the life you want.  

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