IPO, or initial public offering, refers to the first time that a private company’s stock is sold to members of the general public. This trend of IPOs got a tiny bit crazy during an era known as the “dotcom era”. At the time, investors were in the habit of throwing money at any IPO and could be assured of gains, at least to begin with. Investors who had the foresight and smarts to get into and out of these initial public offerings, tended to make investment look like a piece of cake. However, soon, the tech bubble went bust and the IPO market was no longer so sought-after. Nowadays, the IPO boom seems to have taken off again, with any new upcoming IPO looking attractive to investors.
Before you make investments in any financial instruments whatsoever, the golden rule of analysts and experts is to do some checking and research before you make any decisions. Therefore, with the share market today and investing in any IPO that comes about for subscription, it is important for you to sift through the range carefully. How do you do this, especially if every upcoming IPO looks appealing to you? The trick is to find out about companies as much as you can before you invest. Some considerations that you should keep in mind are important before you take your IPO plunge.
The first thing you can do, before you think of a new upcoming IPO to invest in, is to find out about a few IPOs on the market. You can select a few companies, based on resorts, or companies that may be familiar to you and then start your background work. One thing you should know before you invest in an IPO is that you don’t have to open a demat account to subscribe to an IPO.
To start your background work, you must begin by learning as much as you can about the company going public. You have to look at past numbers, how successful the company has been, and the reasons for it going public. Normally, companies go public to expand their scope, after meeting some standards of quality and development. The idea is to learn about the company with as much knowledge and data you can find.
If you were a serious investor, and wished to invest in the share market today, you may do unlimited research on a company before you buy its stock. Especially if you wish to stay invested for the long term, you may consider going through charts and analysing the company in depth. You owe yourself the same degree of knowledge when you investigate any new upcoming IPO. With any new upcoming IPO, you should try and select an IPO with a solid underwriter, that is, a robust investment organisation. Furthermore, you should also read and study the prospectus of any new upcoming IPO. If you have employed a broker, then query the broker if they are pitching too hard. Additionally, analysts agree that being patient until company insiders are willing to sell their shares (the completion of the “lock-up” phase), is a good idea.
Investing in an upcoming IPO has its advantages. For one thing, you have time to do some due diligent work and learn about companies that are going to be listed. Moreover, you do not have to open a demat account, and can choose the amount of shares allocated to you of a company with an IPO. Thus, if you believe that a company stock is a good investment, you may be investing in a load of its stock at a lower price than a price that it may be valued at after being listed.