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 reintroduce themselves into the market. This review will discuss what IPOs are, the benefits they afford traders and how to track and compare them.
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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 the IPO prospectus can be a good source of some information, it can be biased as it is written by the company. Try to find information on financing, previous press releases, industry health and competitors.
- Read The Prospectus: Although not necessarily unbiased, the prospectus can give helpful information on the risks and opportunities present in the upcoming IPOs. For example, if a company will use the income for marketing, research or expansion then the IPO may be a good investment, whereas if it is just being used to repay loans or purchase equity, it may not be wise as the company might need the IPO just to pay back loans.
- Respected Underwriter: Try to limit yourself to looking at IPOs released by large, reputable brokerage firms. These companies can often afford to be more selective regarding the quality of the companies they underwrite. That being said, large companies can still bring out poor IPOs, so always be cautious.
- Be Wary Of The Lock-Up: Lock-up periods can last a few months to a couple of years and prevent investors and insiders from selling shares in this period. If you were to wait until after the lock-up period ends and see that many insiders are selling all their shares in the company, it may tell you that the stock is overvalued and should be avoided (this is more commonly seen for upcoming unicorn IPOs). However, waiting this long can reduce your potential profits in successful upcoming IPOs.
What Details To Look For In Upcoming IPOs
Some of the important details to investigate for upcoming IPOs that can help you make your decision include:
- IPO valuation
- The capital raised
- Supplier confidence
- Recruitment success
- The share price return
- Company management success
It is also a common recommendation to ensure you understand the business and its products or services before making investments.
There are several tools available to aid you in tracking upcoming IPOs. Exchange websites can be hugely useful, such as the New York Stock Exchange (NYSE) and NASDAQ, which has a dedicated section titled “Upcoming IPOs” on their website. Exchange websites are official and reliable, though their need to verify and vet information can mean it is not always the most up-to-date.
Google News allows you to search relevant terms like IPO, which can offer up-to-date news on market commentary, analyst options and other developments for upcoming IPO offerings. Moneycontrol and Yahoo Finance have similar dedicated sections on their websites with details on upcoming IPOs, dates, prices, symbols and links.
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, which all offer tracking in conjunction with broader market statistics, calendars and stock analysis.
One final thing to take note of when discussing upcoming IPOs is the Grey Market Premium (GMP). This is the premium where IPO shares are traded in the grey market. The grey market for IPOs is for deals made in person among trusted vendors, usually facilitated by a neighbourhood 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.
What Brokers Can I Use For Trading Upcoming IPOs?
Any broker that offers spot stocks and shares trading, whether direct market access (DMA) or otherwise, may be able to offer IPO trading. Check with your specific broker before banking on it, though, as some will only offer spots for some major companies. Popular brokers to use include eToro, Coinbase (for crypto-related upcoming IPOs), Fidelity, Upstox and Zerodha.
Are There Upcoming Hot Vegan IPOs?
Yes, there are several vegan-focused companies going public soon. For a full list, visit websites like VegFAQs.
How Long Before You Can Sell IPO Shares?
IPO shares are regularly subject to a lock-up period, usually lasting around six months. However, some companies may have shorter periods (down to three months) or longer ones (up to two years).
What Time Of The Day Do IPOs Go Public?
IPOs go public at different times depending on the exchange they are to be listed on. These exchanges will often have standardised times to release upcoming IPOs, though, so check out their websites to be sure.