IPOs: Not all new shares rise like Royal Mail and Twitter The majority of flotations exclude private savers until the first day the stock trades on the stock market. This can mean missing out on any immediate surges in value. This year there have been three flotations that individual investors have had the opportunity to back - Royal Mail, Direct Line and Esure. Both Royal Mail and Direct Line have to date performed well and shares are well above their offer prices, up 57pc and 34pc respectively. However, in the case of Esure, parent company of insurer Sheilas' Wheels, the stock has lost savers 20pc since its flotation in March. Rob Jones of broker Liberum Capital warned that there is a tendency for some companies to over promise what they can deliver in order to procure as much investment as possible ahead of their stock market listing. Esure, for example, promised to pay a high level of income to shareholders but then backtracked. New listings tend to have a shorter historic trading history and a lower level of disclosure than an existing public company has, which makes it hard to tell if they can back up their claims. For the majority of flotations, investors will only have a company prospectus to base their investment decision on," said Mr Jones. As with other investments, the key is to do your own research and work out for yourself whether the company can meet its promises, he advised. One of the main things to look out for is whether the original backers behind the company - including management and other executives - intend to keep their money in the company for a lock-in period. This will ensure their interests are aligned with yours in wanting the company to succeed. On average, a founder of a company is prohibited from selling any shares from between three months to two years. It is perhaps worth waiting until the lock-in period expires, as if the owner retains their stake it will be a positive indication that they believe the share price can rise higher and the future of the business is bright. Stuart Welch of TD Direct Investing added private investors should also scrutinise the flotation prospectus, which outlines the company's risks and opportunities. "Investors considering getting involved in a flotation need to do their own research to ensure you stay informed about the company you are looking to invest in, by analysing its health and performance, and the industry more widely," said Mr Welch. Iain Tait, a partner at London & Capital, a private wealth manager, added savers should only back a flotation if it is a proven business that they have heard of. For me, the key thing savers need to look into is how long the chief executive has been at the company for. If the bosses have been rooted into the business since the very beginning then you are more likely to find a winner than a loser," said Mr Tait. New stock market listings attract a lot of hype and sentiment. Buying into a flotation and then selling shortly after is known as "stagging" and is frowned upon by some, who say it is not in the spirit of long-term investing. Rebecca O'Keeffe of broker Interactive Investor said this should not deter investors. It is sometimes advantageous to bank profits in the immediate aftermath of a flotation, when the company is still being bought. There is nothing wrong with selling and taking a profit. YearNumber Average AverageAverage Total flotations on British exchanges Year Number of listings Average one day return Average one month return Average total return since listing 3pc 2.9pc 6.7pc 5.1pc 6.1pc 9.3pc 0.5pc 1pc 2.4pc 8.4pc 6.6pc Total 8pc Sources: Interactive Investor and Dealogic