Investing In Upcoming IPOs: A Guide

Invest in Upcoming IPOs in India

An IPO in India or the Initial Public Offering is nothing but the first sale of stock distributed by a formerly private company to the people. If you are new to the stock market, know that IPO is different from a private company.

A private company, on the other hand, has a bit more freedom than a public company as public companies have to abide by the SEC reporting guidelines.

Most investors invest money in an IPO online and are guaranteed returns at first. Companies like VA Linux and theglobe.com were among the companies that experienced huge first-day gains. However, later in the future, they disappointed the investors.

But investments can never be a sure shot thing. Even though IPOs no longer provide quick returns, they do provide reasonable gains in the long term. But the investors need to scrutinize the long-term prospect.

So, if you are an investor and planning to take a chance with an IPO, here are a few pointers that you need to remember.

  • Search for companies that are soon going public on the Internet. Also, look for information related to the company and its competition, financing, previous press releases, and the overall company health. You must be well-versed with the company details before investing in it. This will help you make a wise investment decision.
  • Choose a company that has reliable underwriter. Know for a fact that quality brokerages will bring in quality companies public. For instance, Goldman Sachs (based on its market reputation) can afford to picky about the companies it underwrites compared to the John Q’s Investment House.
  • Always carefully go through the prospectus. Even though it may be tedious or time-consuming, but it will provide you information regarding the company’s risk and opportunities.

    For instance, the company that you are investing in is going to use the money for repaying loans or buy equity from founders and other private investors, remember that it is a bad sign!

    Instead, invest in a company that utilizes the money towards research, marketing, and expanding into new parameters.

Invest In an IPO Online

Once you understand the points mentioned above, you can move ahead to invest in an IPO online. Here’s how to buy IPO online –

Decision

To decide which IPO to invest in, you will have to go through the company’s prospectus. The prospectus provides a fair idea regarding the company’s business plan and its purpose.

Funding

You can invest in an IPO by utilizing your savings. Also, a few financial institutions can help fund your investment at a specific interest rate.

Demat/Trading Account

You need a demat account before applying for an IPO. This account is nothing but a facility that allows you to store stocks and financial securities online.

Application Process

To invest in an IPO online, you will need a trading account or bank account.

Investing in an IPO requires an in-detailed understanding of the stock market. Hence, nowadays, you will find investment companies with a share market app that allows you to make a smart investment decision. You can also use online trading tools, as they not only help you in investing wisely but also provide with all the latest updates on the stock market.

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