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A stock market IPO (known as an initial public offering) is usually a much looked forward to event in a company’s calendar. The decision to go public is never one taken lightly. It’s an event that gets market analysts and watchdogs excited because a new business is entering the market. Each company might handle their IPO in a different way…as a buyer and investor, there are certain things you can do to make sure you get the best out of an IPO.

Be Careful About Price Advice

A lot of market analysts will comment that stock market initial public offering prices are often inflated, with warnings to investors that buying in at the start would expose their position to a market pullback. However, research undertaken by Elsevier has learnt that in fact, IPO’s on average were underpriced by up to 47%. So, although there’s a lot of talk regarding worry around IPO’s, the data backs up the fact they aren’t always overpriced. Some stocks obviously are and can be overpriced, but others are fair. It’s just about doing your research and picking the right ones.

Be Ready For The IPO

Some companies announce their intention to go public quickly, with a quick run to the stock market. Others announce their intention years in advance, giving investors a lot of time to prepare. Before a company announces their intention there are often a lot of rumors and hearsay. Some prefer to buy the stock privately before the IPO, whereas others will wait.

A great example can be seen with the redwood materials ipo. There have been rumors for a while regarding its entrance into the stock market. However, some believe this time will never come. However, the CEO, J.B Straubel, said an IPO wasn’t off the table, but that it would like to grow in other ways first. This is a prime example of the type of news investors cling to and value. It means it could happen at some point, but for the meantime it might be better to look for private investment. Especially if you totally believe in the stock and want to invest.

Read The Prospectus: Don’t Follow The Hype

Sometimes, during an IPO and indeed, during the run up to one there’s a lot of hype around a stock. This is the kind of thing that leads to inflated prices. Don’t just follow the masses blindly and start investing in a stock you know little about just because it has gone public. Instead, do your research. Read the prospectus. Know where the stock is pointing. The more you know about the company, the more an informed decision you can make. You just need to make sure that you aren’t pulled into a mass buying surge that you’ll regret later.

In short, you just want to make sure that buying into the IPO is right for you, and your portfolio. For sure, it can be tough making the right decision. The purchase of IPO stock should be as part of a wider strategy and be in a stock you’ve researched well.