Upcoming IPOs provide the opportunity for investors to profit from buying shares in companies as they go public. The market had been hit hard by the coronavirus pandemic, though it has been recovering quickly and companies are now reintroducing themselves into the market. This review will discuss what IPOs are, the benefits they afford traders and how to track and compare them.
What Is An IPO?
An initial public offering, also known as an IPO, refers to the process of offering shares of a private corporation to the public in a current stock issuance. A share issuance is what allows a company to gain capital from investors and marks the first time a company sells shares to the public. Therefore, upcoming IPOs are those companies that will be going public in the near future.
As well as allowing shares to be bought, IPOs may occur when smaller companies are looking to expand or when larger companies are looking to increase their number of shareholders, restructure their finances or raise further acquisitions and capital.
Why Upcoming IPOs Offer Opportunities For Traders
Investing in upcoming IPOs has become increasingly popular in Europe, especially in the UK, thanks to the potential opportunities it can give traders.
While it can be risky to invest in IPOs due to their unpredictable nature as new listings, some investors see this as an opportunity to reap high rewards. There is no price history and, consequently, no boundaries to how low or high share prices can go when first released.
Upcoming IPOs offer a new and exciting opportunity for trading and the stock market has boomed in recent months. In the UK, the LSE (London Stock Exchange) has been met with many company offers, making it an exciting time for investing in upcoming IPOs.
A key attraction of upcoming IPOs is the opportunity to pick up what could be an underpriced stock before its value rises and large quantities are purchased by brokerages and other institutions.
How To Prepare For An IPO
Several steps need to be taken when preparing for an upcoming IPO. You must have an understanding of how IPOs work, so do some research into share issuances. After this point, you need to find an IPO that you believe may be profitable in the short, medium or even long-term, depending on your approach.
You need to find out what upcoming IPOs there are that you might be able to capitalise upon. There are many sources for this, including exchange websites, like Euronext, the ASX and the BSE, online IPO trackers and finance news sites. Then, when you have identified some companies going public soon, you can begin looking for viable trading options.
Some helpful things to look out for include:
- Objective Research: Obtaining information on private companies is much harder than public ones as there are fewer analysts constantly delving.
While it’s true that the IPO prospectus can provide valuable information, it’s important to keep in mind that it may also be biased, as it’s written by the company itself. To get a more complete picture, try looking into the company’s financing, previous press releases, industry health, and competitors.
- Read the Prospectus: Although not necessarily unbiased, the prospectus can provide helpful information on the risks and opportunities associated with the upcoming IPO. For example, if the company plans to use the funds raised for marketing, research, or expansion, the IPO may be a wise investment. However, if the funds will be used solely to repay loans or purchase equity, the IPO may not be a good choice, as the company may be relying on it to pay off debts.
- Choose a Respected Underwriter: It’s generally a good idea to limit your search to IPOs underwritten by large, reputable brokerage firms. These firms can afford to be more selective and have higher-quality companies in their portfolio. However, even large firms can release poor IPOs, so it’s important to exercise caution.
- Be Wary of the Lock-Up: Lock-up periods can last from a few months to a couple of years and prevent insiders and investors from selling their shares during this time. If you wait until after the lock-up period ends and notice that many insiders are selling their shares, it may be a sign that the stock is overvalued and should be avoided. However, waiting this long can also reduce your potential profits in successful upcoming IPOs.
What to Look for in Upcoming IPOs
When investigating upcoming IPOs, it’s important to pay attention to key details such as:
- The IPO valuation
- The amount of capital raised
- Supplier confidence
- Recruitment success
- The share price return
- Company management success
Additionally, it’s recommended that you thoroughly understand the business and its products or services prior to making an investment.
IPO Tracking Tools
There are several tools available to help you keep track of upcoming IPOs.
Exchange websites are incredibly useful, and there are many to choose from. For example, the New York Stock Exchange (NYSE) and NASDAQ both have dedicated sections on their websites for “Upcoming IPOs”. While exchange websites are official and reliable, they may not always have the most up-to-date information due to their need to verify and vet information.
If you want the most up-to-date news on market commentary, analyst options, and other developments for upcoming IPO offerings, you can use Google News to search relevant terms like IPO. Moneycontrol and Yahoo Finance also have dedicated sections on their websites with details on upcoming IPOs, including dates, prices, symbols, and links.
In addition to exchange websites and general financial news sources, there are also IPO-specific websites and services designed for the sole purpose of tracking upcoming IPOs. Some of the more popular options include IPO Monitor, Marketwatch, and Renaissance Capital IPO Centre, all of which offer tracking in conjunction with broader market statistics, calendars, and stock analysis.
Finally, it’s important to note the Grey Market Premium (GMP) when discussing upcoming IPOs. This is the premium where IPO shares are traded in the grey market, which is for deals made in person among trusted vendors, usually facilitated by a neighborhood broker.
If an investor uses this market, then they could sell or share their IPO before the company gets listed on the stock exchange, potentially putting you at an advantage.
There are many forums online for upcoming IPOs which discuss this further, including lots of information available on Chittorgarh.
Final Word On Upcoming IPOs
IPO investing can allow you to take advantage of under-priced, newly-public companies with the potential to produce big profits. Brokerages like Robinhood also facilitate commission-free stock trading with upcoming IPOs, making the investment strategy even more attractive. While there is potential, investors should be aware of the risks involved with trading IPOs, as companies can fail or shares can be overpriced. Read our guide above to discover what to watch out for.
Where Can I Find A Blog For The Top 5 Upcoming IPOs?
There are many online blogs readily available with information on upcoming IPOs, as well as forums like Reddit. Additionally, financial news outlets like Forbes will often have their own lists of the top IPOs to watch in 2023 for UK, European or global IPOs. You may also find industry-specific worldwide hot IPO lists, like biotech, healthcare or crypto companies.
Are Upcoming IPOs Worth Buying?
There are many IPOs constantly entering the market, many of which could make a good investment.
Evaluating whether or not an IPO is worth buying is down to the individual and requires an assessment of the risk and potential reward. Read our guide above for key information to research.