I found Alexis Chow’s blog post on Potbelly Corp. very interesting, and decided to do some research of my own. Alexis talks about how the company has succeeded despite the abundant competition in the industry, and comments on their great value proposition but neglects a huge part of the story. When Potbelly’s IPO was released it became one of the biggest IPO stories of the year when it closed 120% higher than it’s IPO price at just over $30.
In Class we talked about Facebook’s IPO and how it was deemed a screw up, because the IPO price was too high. Potbelly on the other hand is an example of an IPO priced too low. In this scenario investors made massive gains, all at the expense of Potbelly. When an IPO is too low the company is not getting a large enough take to prepare for the future. Long term investors should be worried because they may not have received the necessary capital from going public to grow in the future, unlike an IPO such as Facebook. In a situation like this, the only people who actually win are those who took the risk on the IPO.
http://www.fool.com/investing/general/2013/10/17/it-was-a-beautiful-ipo-for-potbelly-insiders.aspx