You don’t have to tell Willis Williams that the initial public offering calendar has been busy this year.
Williams, 44, a New York area digital marketing strategist who helps create advertising campaigns for social media, has been regularly tracking which companies are going public and when.
His goal: To buy the shares of the companies early so that…
he can be in on it if the stock takes off.
Williams’ interest in IPOs started with Twitter, which went public in 2013, and then extended to other newly public companies such as Uber, which debuted on the New York Stock Exchange in May.
To stay up to date, he tracks when those shares will become available to retail investors through his brokerage account.
“I really missed out on Google,” Williams said of the company’s 2004 IPO, which saw its shares rise 18.05% on its opening day to close at $100.34. Fifteen years later, the stock had climbed by more than 2,600%.
“I am a strong believer in buying into companies you use or you really like,” Williams said. “As soon as it opens, I buy it.”
Investors such as Williams have been in luck this year, with familiar brands — including Uber, Lyft, Levi Strauss and Pinterest — opting to raise money on the public markets.
IPOs allow private companies to raise money by selling shares publicly. The companies typically list on the public markets, such as the NYSE or Nasdaq, giving public investors the ability to invest in those stocks. The company’s existing private investors, meanwhile, often have access to those shares at a premium.
The market’s appetite for new IPOs is still strong, if the upcoming listing of oil company Saudi Aramco — poised to be the largest IPO to date — is any indication.
But there are some key things to keep in mind if you’re an investor looking to wade into these deals.
You don’t have to be first to the party
It may not be easy to get in on an IPO deal early.
That’s because to participate, you often have to have an account at a brokerage firm that is participating in the deal, notes Barry Glassman, founder and president of Glassman Wealth Services, with offices in Vienna, Virginia, and North Bethesda, Maryland.
The deal’s availability may also be limited by how many shares are actually going public and how much demand there is for the offering, Glassman, a certified financial planner, said.
“We’ve seen investors request shares, and then get a much smaller allocation, or a token allocation, or shut out from the allocation,” he said.
Investors who are interested in an IPO can start by checking with the financial institutions with which they’re currently affiliated to see if they can get in.
But those same investors would be wise not to rush, according to JJ Kinahan, chief market strategist at TD Ameritrade.
“You don’t have to be the first one to the party,” Kinahan said. “Too often, people get very excited about a product, and a great product does not necessarily mean a great stock.”
Make your timeline your first priority
Whether you invest in an IPO or not should first be determined by whether it makes sense for you personally before you consider the particular investment’s risks.
One important question to ask yourself…
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