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Don't Be Misled by Lofty IPOs

Most IPOs -- and especially tech IPOs in the last few years -- have a tendency to swell to lofty valuations on investor hype in the first few weeks of trading on the public markets.

In this segment from Industry Focus , Motley Fool analysts Dylan Lewis and Michael Douglass take a look at some of the biggest tech IPOs from past year and see how they compare to the market average in their first year, and explain why even the biggest IPOs (like Facebook (NASDAQ: FB) ) tend to fall significantly in value in their first year.

A full transcript follows the video.

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This video was recorded on July 14, 2017.

Dylan Lewis: Michael, we're wrapping up "Never Will I Ever" week. Tech is known for its high-flying IPOs --

Michael Douglass: No.

Lewis: [laughs] Often, these tech companies, because they are so highly followed pre-IPO, when they're private, you have all these billionaire unicorns, there's a lot of fanfare, there's a lot of investor interest, there's a lot of consumer interest. A lot of times, these businesses are very consumer-facing. So when they actually do start going public, it's just craziness.

Douglass: I think it's not just that they're consumer-facing, but usually they're also claiming some sort of disruptiveness. When you're thinking about investing, people are excited...