IPOs aren’t just important for founders and CEOs. Or for the investment bankers who helped them file paperwork and price the company’s stock. Here’s what initial public offerings – aka when private companies sell new shares to the public for the first time – could mean for your wallet.
Are you looking for a hot investment?
They may not be new businesses, but companies going public are new to stock exchanges. Meaning, unlike stocks that have been trading for a while, you can’t use historical data to gauge performance. Investors could win big. Or not.
Pro tip: watch and wait. After an IPO, there’s a lockup period when “insiders” (like founders, employees, and VCs) can’t legally sell their shares. Letting the hype die down and seeing what happens post-lockup could give you a hint at the company’s health.
If you decide to go for it, don’t invest cash you can’t afford to lose.
Related: theSkimm on Investing
Are you a fan of the brand?
Stay tuned. Issuing stock can help companies raise a LOT of money. Money that could be used to improve products and make users happier. That’s good for customers.
But public companies have to answer to shareholders. That can mean more pressure to make money. TBD if that leads to more ads or other changes.
Are you wondering what all this means for the economy?
Mixed messaging. Many experts think a strong IPO market = a strong economy. But IPOs have thrived even during some not-so-great times. See: a global pandemic.
Some say more companies going public can boost the economy and create more jobs.
theSkimm: IPOs can be exciting. If you’re tempted to get in on the fun with some of your own money, make sure it fits into your larger investing strategy. And that you’ll be OK financially (and emotionally) if the investment doesn’t pay off.
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Skimm'd by: Ivana Pino, Stacy Rapacon, Casey Bond, and Elyse Steinhaus