{"id":502,"date":"2020-06-20T12:04:49","date_gmt":"2020-06-20T12:04:49","guid":{"rendered":"https:\/\/www.invest19.com\/blog\/?p=502"},"modified":"2020-06-20T12:04:51","modified_gmt":"2020-06-20T12:04:51","slug":"5-things-you-should-know-before-investing-in-an-ipo","status":"publish","type":"post","link":"https:\/\/www.invest19.com\/blog\/5-things-you-should-know-before-investing-in-an-ipo\/","title":{"rendered":"5 Things You Should Know Before Investing in an IPO"},"content":{"rendered":"<div style=\"margin-top: 0px; margin-bottom: 0px;\" class=\"sharethis-inline-share-buttons\" ><\/div>\n<p>Initial Public Offering (IPO),\nthe first time when a privately-owned company decides to sell its shares to the\ngeneral public. It is to raise capital by issuing equity or debt financial\ninstrument under the IPO process. Being publically traded opened many financial\ndoors for a company. With the raised capital, the company or corporate can do\ndebt repayment, expansion, finance other business activities, and pave way for\nmerger and acquisitions. <\/p>\n\n\n\n<p>From the investors\u2019 point of view, <a href=\"https:\/\/www.invest19.com\/ipo\/\"><strong>investing in an IPO<\/strong><\/a> has its own set of benefits. It is an opportunity for them to unearth quality stocks that are yet to be listed, at a much-discounted price. However, it is not as easy as it seems. Investors who have the foresight to get in and out made it looks easy but it is not. Nowadays, IPO investing pick up the trend once again. But, the focus has shifted towards early gains rather than holding to carefully scrutinize its long-term prospects. <\/p>\n\n\n\n<p>As a result, many investors are making mistakes while investing in IPOs. Thereby, we\u2019ve come up with some important things that you should know or consider before investing in any IPO stocks. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"counter-hierarchy counter-decimal ez-toc-grey\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\"><i class=\"ez-toc-glyphicon ez-toc-icon-toggle\"><\/i><\/a><\/span><\/div>\n<nav><ul class=\"ez-toc-list\"><li><a href=\"#Read_the_Red-Herring_Prospectus\" title=\"Read the Red-Herring Prospectus\">Read the Red-Herring Prospectus<\/a><\/li><li><a href=\"#Check_for_Promoters_and_Brokers\" title=\"Check for Promoters and Brokers\">Check for Promoters and Brokers<\/a><\/li><li><a href=\"#Future_Prospects\" title=\"Future Prospects\">Future Prospects<\/a><\/li><li><a href=\"#Lock-Up_Period\" title=\"Lock-Up Period\">Lock-Up Period<\/a><\/li><li><a href=\"#Avoid_the_Hype\" title=\"Avoid the Hype\">Avoid the Hype<\/a><\/li><\/ul><\/nav><\/div>\n\n\n\n\n<h1 class=\"wp-block-heading\">What You Should Know Before Investing in an IPO?<\/h1>\n\n\n\n<p>Below we\u2019ve mentioned the 5 key\nthings you should know before investing in an IPO stock:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Read the Red-Herring Prospectus<\/h3>\n\n\n\n<p>Thanks to the Securities &amp;\nExchange Board of India (SEBI) for mandating every company to file a draft of the\nred-herring prospectus with them at the time of applying for IPO. Any\ninformation you want will be available within the prospectus. So, as part of\nyour IPO research, don\u2019t forget to read the red-herring prospectus. It will\ngive you a lot of historical information about the company. So, make sure you\nread it carefully. <\/p>\n\n\n\n<p>Look out for current\ndistribution. If the majority of shares are held by institutional investors and\nbanks then it would be a good sign. You should also check out about the\nmanagement.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Check for Promoters and Brokers<\/h3>\n\n\n\n<p>Any key thing to look at is the\nlist of promoters who are promoting a particular IPO. The promoters could\neither be a company or an individual. If you spotted some recognized names\nwithin the list then it would definitely be good and certainly, add credibility.\n<\/p>\n\n\n\n<p>IPOs have brokers and\nunderwriters which help the company with the IPO process. As you are planning\nto invest in an IPO, then you must know who is bringing it on the table. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Future Prospects<\/h3>\n\n\n\n<p>It is not always about what\nhappened in the past or how the company performed in the last 10 or 20 years.\nYou must be doing research from the future point of view as well. After all,\nyou are investing in future financial goals. So, if the investment is for the future\nthen you should be able to review the prospects. <\/p>\n\n\n\n<p>Consider the industry and how the\nIPO fits into the picture. What future do you see of the company in the next 10\nyears?<\/p>\n\n\n\n<p>When you want to invest in an\nIPO, you would want to grow over time. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Lock-Up Period<\/h3>\n\n\n\n<p>Whenever a company goes public,\nthe underwriters make company officials and employees sign an agreement,\nprohibiting the employees from selling any shares for a specific period. This\nperiod is often called the lock-up period. Within this period the employees and\nofficials are prohibited from selling shares. But, when the lock-up period\nends, all the insiders are prohibited to sell their stocks which put severe\ndownward pressure on the stock price. So, while you are at it, find out about\nthe lock-up period and then consider waiting until it passes. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Avoid the Hype<\/h3>\n\n\n\n<p>You must understand that the\nunderwriters are a salesman. The whole IPO process is to create hype and\nreceive as much attention possible. After all, the IPO is something happen once\nfor each company. Some IPOs meet the expectation and continue to grow in the\nfuture but most IPOs end up selling below their offering prices within a year.\nSo, do not make that investment because it\u2019s an IPO. Think of it as an\ninvestment for your growth. <\/p>\n\n\n\n<p>Hope, this guide will help you in\nfiguring out the right IPO to invest in. If you have any query or would like to\ncontribute something here don\u2019t forget to mention in the comment section below.\n<\/p>\n<div class='epvc-post-count'><span class='epvc-eye'><\/span>  <span class=\"epvc-count\"> 4,103<\/span><\/div><div class=\"pld-like-dislike-wrap pld-template-1\">\n    <div class=\"pld-like-wrap  pld-common-wrap\">\n    <a href=\"javascript:void(0);\" class=\"pld-like-trigger pld-like-dislike-trigger \" title=\"\" data-post-id=\"502\" data-trigger-type=\"like\" data-restriction=\"ip\" data-ip-check=\"0\" data-user-check=\"1\">\n                        <i class=\"fas fa-thumbs-up\"><\/i>\n                    <\/a>\n    <span class=\"pld-like-count-wrap pld-count-wrap\">3    <\/span>\n<\/div><\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>Initial Public Offering (IPO), the first time when a privately-owned company decides to sell its shares to the general public. It is to raise capital [&hellip;] <span class=\"read-more-link\"><a class=\"read-more\" href=\"https:\/\/www.invest19.com\/blog\/5-things-you-should-know-before-investing-in-an-ipo\/\">Read More<\/a><\/span><\/p>\n","protected":false},"author":1,"featured_media":504,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[70,7],"tags":[113,140],"class_list":["post-502","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ipo","category-investment","tag-ipo-investing","tag-things-to-consider-in-investing-in-ipo"],"_links":{"self":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/502","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/comments?post=502"}],"version-history":[{"count":1,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/502\/revisions"}],"predecessor-version":[{"id":503,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/502\/revisions\/503"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media\/504"}],"wp:attachment":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media?parent=502"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/categories?post=502"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/tags?post=502"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}