The Secrets Nobody Will Tell You About Pre-Ipo Investment

 

The stock market is flooded with numerous listed companies. Beyond its reach, there operates a parallel market of pre-IPO or unlisted shares trading. Pre-IPO stocks are shares that a private company sells to investors before its issuance to the public. Most companies use pre-IPO placement to sell the pre-IPO stock. Institutional investors, private equity firms, and retail investors invest in these shares. 

The IPO shares have gone through speculative activities in the past years. With no intention of keeping the shares for a certain period of time, they purchase pre-IPO shares. This leads to the undervaluation of the shares’ value.

To lessen this effect, the investment bankers often help their clients contract a pre-IPO placement.

Perks of investing in pre-IPO shares

1.    Early action and more profit

The investment in the pre-IPO shares is favorable if the company grows significantly. It grows your wealth in the long run. If you are a shareholder of an impeccable start-up, along with the growth of the company, you successfully hit the target of your desired goals. 

2.    Future goals

Investing in an IPO is similar to an equity investment. IPOs have the potential to bring you a lot of profits in the future and by that, you will be able to effectuate your long-term goals. The Indian IPO market is also growing every day and has generated billions of revenue figures through IPOs.

3.    Transparency

Like large-scale investors, you get to have clear transparency of the price. The investors can see the price of the securities in the IPO order. The functionality of this trading is quite transparent sometimes. When a company turns into an IPO after IPO placement, the prices of these shares depend highly on the market fluctuations and the analytics.

      4. Higher return on investment

Before the IPO shares placement, the companies offer their shares at a discounted price. So, when a promising company will float for IPO, it is going to offer its shares at the reasonable price possible but if it succeeds in making a profit in the long run, it becomes impossible to invest in that company.

Let’s have a look at an example of Amazon. In 1997, Amazon.com floated an IPO. Each share was priced at $18 and the people who bought the shares at that time have earned millions of profits now through the IPO.

Why do companies offer their IPOs?

1. IPO is a great process to make money. When a company offers an IPO, it means they are looking for investors who can supply enough funds for the growth and expansion of their business, to repay loans and other capital requirements.
2. If a company has decided to go public, this means it has gained enough success, and reach and is ready to launch in the stock exchange. It’s the best time to invest in pre-IPO companies.
3. The trading market is expanding and becoming more demanding. So, a public company has the capability to offer more stocks and it gives a better way to acquisitions.