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        IPO Insights

        Views 9712022.09.21

        How to choose right IPO?

        The market for initial public offerings is partying again. 

        Fourteen IPOs are scheduled to hit the public market this week, marking the most weekly since 2014, according to Renaissance Capital, which advises investors on IPOs. By planned proceeds — an anticipated $7.8 billion — this is the biggest week since May 2019 when Uber went public.


        Already this year, 113 companies have raised $38.4 billion. And many have done well: The $Renaissance Cap Greenwich Funds Ipo Etf(IPO.US)>And many have done well: The $Renaissance Cap Greenwich Funds Ipo Etf(IPO.US)$ is up roughly 59% so far this year. <nbsp;is up roughly 59% so far this year. 


        However, not every new publicly-traded company remains high down the road despite a strong debut. Add in the volatility that’s ruling the stock market this year, and there are reasons for investors to approach any IPO with some caution.

        Certified financial planner Doug Boneparth, president of Bone Fide Wealth in New York, 

        With an IPO, you never know which way things are going to go, regardless of how much hype there is about any company going public.

        How to track upcoming IPOs

        Open Moomoo→News→Calendar Tab→IPOs


        Source: moomoo

        What is IPO

        Initial public offering (IPO) is the first time a company sells its shares to the public. Through this process, colloquially known as floating, or going public, a privately held company is transformed into a public company. 

        Why IPO

        IPOs are a way for privately owned companies to raise money by selling shares to the public. Before a new stock issue reaches the market, investment banks, which generally underwrite the IPO, sell shares.

        Retail investors usually have to wait for trading to start through a market like the New York Stock Exchange or Nasdaq. 

        Uncertainty of IPO

        Boneparth said,

        If there’s huge demand for the debuting company, you’ll see the stock price pop right after opening. 

        On the other hand, he said, if there’s a lack of demand or the markets think the stock is overvalued, the share price could fall. That doesn’t mean it won’t go back up again, but you could be waiting a while.

        For example, $Facebook Inc(FB.US)$— which now trades above $270 — debuted in May 2012 at $38 share. By September of that year, it had dropped below $18. It took another year for it to even climb back up to its initial offering price.

        How to choose the right IPO to invest in

        Research is the first step!

        Whenever investing to Pre-IPO shares, we highly encourage you to search the internet for information on the particular company, its reviews, ratings, past customer delivery experiences as well as its overall industrial health. 

        That includes checking out its S-1 filing with the Securities and Exchange Commission to scrutinize the balance sheet and find out the potential risks of investing in the stock. (SEC Form S-1 is the initial registration form for new securities required by the SEC for public companies that are based in the U.S.)

        You might want to wait for the lock-up period to end.

        Typically, those pre-IPO shares are reserved for sophisticated investors or institutions with access to such deals. Those buyers may be required to hold on to the stock for a certain length of time — six months, often — before they can sell it. 

        Boneparth said,

        If you’ve done your due diligence, the company has strong fundamentals and you believe in the company for the long term, then it can be good to get in early. The price might be much lower today than years down the road.

        Keep an eye on the valuation.

        For investors, valuation is one of the toughest things to conclude as the process is extensively technical. A good idea would be to compare the valuation of the IPOs with a listed peer in the secondary market.

        Boneparth said,

        Just don’t buy hype. You’re buying a company.

        Read more: IPO Basics 101

        Source: CNBC, Ekvity

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