It seems the only smart play in IPOs is to short all of them. It's a suckers game. The most positive EV play however is to just stay out of IPOs period. Never invest in them. Ever. Regardless of long/short or your sophistication.
The only benefit of an IPO is given to the underwriters. When lock-in ends, C-levels cash out. Generally investors believe "getting in on the ground floor" is the reason you invest in an IPO. However, its a given that people have already gotten in on the ground floor (underwriters, shareholders, etc), and the banks are just looking for someone to hold the bag. There is a reason IPOs tend to come out in raging bull markets. Stupid people with too much money will buy anything with a pulse and a promise. There is a significant amount of truth to the observation that a company IPOing likely isn't doing well on it's balance sheet - but what greater fool stops by the 10-Q to see? Best to wait for secondary issues after the hype has died down and the weak hands in the C-suite and underwriting company have been shaken out.
