PostHeaderIcon Investing in IPO’s

IPO’s or Initial Public Offerings have once again taking a share of the limelight in the world of tech. Many internet companies are once again contemplating or making plans on going public, especially those that are perceived to be quite popular like the social networking Facebook. Those that have went on with their IPO’s recently like LinkedIn, Groupon and Zynga are so far enjoying steady trading after the initial flooding of interest on their entry into the stock market.

The success has so far encouraged other tech and internet companies to follow suit and plan their own IPO’s. This is generating continuous buzz among investors who would like to take advantage of the next Google. But on the side of investors, there are still some things to consider other than just relying on the current buzz to be considering investing in the new IPO’s. Here are just some of them:

Objective research on the companies may be next to impossible.

For most companies about to plan holding an IPO, the problem is always trying to collect the necessary information about them. Such companies may not even be making news or be in the mix that would cause industry analysts to keep track of them. Since they are privately owned companies, information about their business and operations will not always be readily available from the usual sources, given that they are not required to fully disclose corporate information, unlike the publicly traded companies. Gathering information on them might be quite a challenging task, making it difficult for investors to truly gauge the current financial status of the company.

Remain cautious despite the excitement.

A planned IPO of a popular tech company may be generating some buzz in the investing sector, but it may be wise for the savvy investor to remain cautious just the same. It may be considered as a positive attribute to an investor. If brokers are trying to recommend investing in such IPO’s, investors should try to look at it with some bit of skepticism. The broker recommendation might mean that the company might not be generating interest enough from the big money managers for them to invest in it. The more brokers are incessantly pushing for investing in such, the more skeptical one should become. On the safe side, it may not be a good investment after all if even big players in the stock market are passing on it.

Consider waiting for the lock-up period before investing.

One way that investors may be able to gauge whether an IPO is a good investment is by waiting how the underwriters and the insiders react when the lock up period expires. The lock up period is that waiting period required for company insiders and underwriters where they are not allowed to sell their recently IPO held stock shares. When the lock up period expires and the insiders decide to hold on to their shares, it may indicate that the company may be showing a strong growth potential. But if the same group of people suddenly unloads their shares into the market, it might be an indication that the company in question might not be a good investment after all.


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