Should you invest in an IPO?

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Well, putting your money in a new company could be a little risky.

However, having sound knowledge about the business model, its cash flow, fundamentals can help you to know better whether you should invest in that particular company or not.

Also Read : What Is an IPO?

It is recommended to analyze the company before investing your crucial fund.

Here are the few factors you should consider if you are in planning to invest in an IPO:

1. History of the company:

To know about the background of the company, the companies issue a red herring prospectus, which contains all relevant details to make you enable to make investing decisions.

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Once you start analyzing it, you will come to know how the company works, how they will utilize the money raised through the IPO and what their future plans, etc are.

Also Read : What is the process of IPO?

2. Lockup:

The lockup period means that the company does an agreement that contains the period in which the company’s insiders and investors are prohibited to sell any shares of stock for a specified period.

This lockin period can be from three months to 24 months. Once the lock-in period expires, investors get rushed in selling the shares and you will see a fall in the company’s share price. 

3. Flipping:

Flipping means reselling the IPO stock within a few days of IPO to earn a quick high profit before the stock starts falling.

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Things you should know before investing:

Success or loss of the company will have a direct impact on your invested amount.

You can get a higher return one day and can have to bear the loss on another day as well. Because the market always stays volatile.

Don’t get confused with the company brand with its business. You may love the brand of the company but it doesn’t mean you would stock too.

Examine the risk and reward you are ready to bear before investing in an IPO.

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