Too Much Baggage for Me

How would you react if somebody offered you $0.60 of value for each $18 you gave them? You'd instantly see a 96.6% dilution. Imagine now that insiders had paid just $0.99 for the same thing you'd have to buy at $18. I'd guess you wouldn't be too excited to invest.

Anyone who bought into the initial public offering of luxury luggage maker Tumi (TUMI), which took place April 19, was doing exactly that. Here's the section of the company's offering prospectus that details how new buyers put up 87% of the total equity in order to own 28% of the post-offering structure. Money from the new shares took book value per share from negative $4.01 to $0.60. The $18 IPO price represented 54.5x Tumi's trailing 2011 EPS and 30x their post-offering book value....247 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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