Never mind the happy ending: this is a senseless approach to investment. Risking savings you will need within a year on the stock market - and on an untested stock at that - could so easily go wrong. Think of Facebook (US: FB), whose initial public offering (IPO) in 2012 was also marketed at private investors and amplified by the media circus. At $64 (£39), Facebook's shares are now worth considerably more than the $38 flotation price, but if Tom had bought in and been forced to redeem his stake even a year later, he would have lost nearly a third of his money.
Unfortunately, most people's understanding of the stock market is coloured by anecdotes like these, not the humdrum reality of managing a portfolio. This makes me instinctively sceptical of what stock brokers call 'retail' IPOs - those aimed at individual as well as institutional investors.
By all accounts, this scepticism is going to be well tested this year. Almost every week, some company or other is reported to be considering going public. Following a strong year on the stock market, retail and restaurant chains are particularly well represented, including House of Fraser, Fatface, B&M, JustEat, Game Retail, Phones4u, DSS, Poundland, and AO.com.
Probably only a minority of these IPOs will be open to you and me. Companies and their stock brokers find it easier and cheaper to deal with professional investors. But the proportion of retail IPOs may be higher than usual, because retailers may see the cost of reaching out to amateur investors as a way of boosting their consumer brand.
Besides, singling out retail IPOs may be misleading. Whether teachers or fund managers are involved, UK flotations have an astoundingly poor track record. I can't find figures specifically for retail offers, but the Bloomberg UK IPO index, which tracks the performance of all companies with a market capitalisation greater than €50m (£42m) for a year after they list, has fallen 23 per cent since its launch in September 2001. The FTSE All-Share has risen by nearly a half over the same period.
Private equity is a popular culprit. Cases such as Debenhams (DEB) - whose stock was refloated by its private equity owners in 2006 at 195p and now trades at 74p - have given the industry a reputation for stripping companies of assets and staff and then selling them to a gullible public when profit margins and multiples are at a peak.
It is certainly sensible to question the motives of sellers - not least because private equity controls most of the retailers with plans to list this year. But this narrative of buying low and selling high, which the private equity industry has an interest in preserving, isn't convincing. For every Debenhams there is a Countrywide (CWD), which was taken private at the height of the credit boom and relisted last March. And let's not forget that private equity companies typically offload less than half their stake at the IPO, leaving them with every interest in floating early in a bull market.
Moreover, private equity is just as active in New York, where IPOs have performed better in their first year - staggeringly so. The US equivalent of that Bloomberg IPO index has returned 20 per cent a year since it was launched in 1994, including dividends, beating the S&P more than twice over. This has spawned a whole fund management sector specialising in flotations, including two exchange traded funds (the First Trust US IPO Index fund and the Renaissance IPO ETF).
In fact, I have yet to hear a convincing explanation for why London IPOs have performed so poorly - although the city's popularity with volatile mining companies may be one factor. If you have any insights, please get in touch.
So does this mean you should simply ignore this year's flotation hype? It's probably the safest strategy. Yet those who don't like to see an opportunity pass them by can at least take heart in a reasonably benign outlook. After all, equity capital markets have only just started to open after a moribund half decade: London IPOs raised $11.6bn last year, up from $4.4bn in 2012 but down from $15.7bn in 2011 (of which $10bn was Glencore), according to Renaissance Capital. "The last IPO window lasted two to three years from 2005-07," points out Joe Brent, head of research at broker Liberum. "It's only when you get into the latter stages of the window that you have to worry." Just don't risk your wedding fund.
