Should We Invest in IPOs? (我们应该投资在新上市的公司吗?)
Author: | Publish date: Fri, 18 Dec 2020, 12:30 PM
Initial Public Offerings (IPO) means that this is the first time a private company decided to sell their shares publicly. IPOs back in technology bubble at 2000 was a steal, as most people earned a lot just by subscribing these IPOs.
IPOs will create a lot of hype among the investors, and that is what majority shall avoid. When there is a lot of people talking over this new stock, means many people tend to invest into it. This will lead to the surge of valuation, where it will potentially causes the investors to lose money.
How does the recent 5 companies that perform IPO back in October 2020? (look for the picture below)
BUT are all IPOs will surge this much?
The answer is a solid NO!
The examples given below are at least one-year-old, which means investors that subscribe to these IPOs are still suffering losses, till this day.
Hence, research is still important when investing in IPOs. There should not be any differences when assessing IPOs with other companies. Since the share price will normally surge up after IPO, most of their future growth has probably been priced in, and this should be another consideration when investing IPOs.
Investors that subscribed to the IPO initially will have a certain lockup period where they can’t sell their shares for around 180 days. Hence, the share price may fall after the end of lockup period.
In short, IPO investment has a higher risk than normal stocks due to the uncertainties. However, if sufficient research has been done by the investors, investing in IPO is a good call as you will be able to buy the stock at a relatively low price.
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