Warning: Ipo Mania Can Be Costly

The sizzling market in new issues is encouraging lots of companies to go public. Small investors, beware.

Mutual funds are not the only red-hot investments these days. Initial public offerings have been equally incendiary. Like mutual funds, IPOs have been an attractive market for investors -- if they can avoid getting burned. For instance, weeks before MathSoft sold its stock to the public for the first time, eager investors lined up to get a piece of the action. Lured by brokers' pitches and a prospectus that touted the computer-software producer's growth potential, customers quickly snapped up the company's 2.5 million shares at $13 each when the issue began trading in February. After a brief run-up to $21.50 on...

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