IPOs are always being listed on the exchange and you can make a considerable amount of money from buying and selling IPOs at the right time, but what are they specifically. Well in this post I am going to break down this acronym, and tell you whether or not you should invest in an IPO.
I – INITIAL
Well let’s begin with the first letter of IPO, which stands for initial. When a private company is planning to grow rather quickly, they look for funding in various places. Take “Publix” for an example, they offer their own employees an opportunity to buy a share of a company. With that money reinvested in Publix the company is able to acquire more assets to grow in profitability.
P – PUBLIC
The “P” in IPO stands for public. After massive expansion, a company like Publix is able to go public with their stock. This means a non-employee of Publix can become a shareholder in the company now.
O – OFFERING
I stands for Initial, P was for Public, and O is for Offering. As an Initial Public Offering, a private company is able to become a public company. The benefits of this transitions helps the company go from a couple hundred thousand in funding, to millions or even billions in funding.
When a company is newly listed the information of its business dealings are very slim to none. Which means many investors do not know much about the company’s Assets, Liability, and the companies performance record (profits).
Even with knowing very little about a newly listed company, investors still gamble and invest in IPO’s. Which result in these investors loosing everything.
So taken it from Benjamin Graham when he states that the more you know the better with stocks; this is my translation of what Ben teaches in his book “The Intelligent Investor.”
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