What is investing in an IPO
This post is rather a response to the investor why he needs it, rather than a story about what it is. Let’s go🏃🏼♂️
An IPO is the first public offering of a company’s shares on the stock exchange.
Why? Imagine that the Ferrari company is not yet on the stock market, it is worth 10 billion and plans to place 10% of the shares, that is, for 1 billion. There can be many reasons for this event: just status, raising money to invest in the company’s growth, transparency will give new credit lines from banks, the co-owner wants to sell a large share, etc..
What do I get from this? Participating in an IPO The purchase of shares is carried out at the underwriter’s estimated price, then the shares are placed on the market and the price can change dramatically. If you choose the right IPO, on average it gives + 15-20% in dollars in one day. And this is the norm.
Cool, where to start? View the history of transactions in which the company participated (ask in direct). Examine the risks and calculate all commissions. Make a decision to participate.
What’s the strategy? I invest equal amounts of money in every IPO that is offered to me. Because my schedule is busy and I have no time to do DCF analysis and calculate multipliers for each company. If you have this time or are meticulous, this is welcome in investments. And, maximum diversification.
And how much did he earn? Over the past 5 years, the average annual income of the clients I led in this product was 40-60% per annum in dollars. I didn’t count my%, yes, a shoemaker without boots.