How To Choose The Right IPO

Over the last year or so, the stock market has been hogging the limelight. Companies have been coming out with Intial Public Offerings (which is when the company first makes its shares available to the public by getting them listed on the stock exchange). Everyone wants to join the party and make money.

Let's say you do get in on an IPO. Here are a few things to look out for.

1. No History
It's hard enough to analyze the stock of an established company. An IPO company is even trickier to analyze since there won't be a lot of historical information. Your main source of data is the red herring, so make sure you examine this document carefully. Look for the usual information, but also pay special attention to the management team and how they plan to use the funds generated from the IPO.

2.The Lockup Period

If you look at the charts following many IPOs, you'll notice that after a few months the stock takes a steep downturn. This is often because of the lockup period.When a company goes public, the underwriters make company officials and employees sign a lockup agreement. Lockup agreements are legally binding contracts between the underwriters and insiders of the company, prohibiting them from selling any shares of stock for a specified period of time. The period can be anything from 3 to 24 months. 90 days is the minimum period stated under Rule 144 (SEC law) but the lockup specified by the underwriters can last much longer. The problem is, when lockups expire all the insiders are permitted to sell their stock. The result is a rush of people trying to sell their stock to realize their profit. This excess supply can put severe downward pressure on the stock price.

3.Avoid the Hype
Since IPOs only happen once for each company, they are often presented as "once in a lifetime" opportunities. Of course, some IPOs soar high and keep soaring. But many end up selling below their offering prices within the year. Don't buy a stock only because it's an IPO - do it because it's a good investment.

4.Qualified Institutional Buyers (QIBs) **

If the issue has been subscribed more in qualified institutional buyers (QIBs) followed and non-institutional section, then the probability of IPO to be a hit increases.

HAPPY BUYING

IPOvsFPO

assume that u understand IPO per se. IPO is raising funds from public for the very first time(by sharing the ownership with them) while issuing more shares in the public for the want of more funds is called FPO.

An initial public offering (IPO) referred to simply as an "offering" or "flotation," is when a company (called the issuer) issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded.

In an IPO the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offering price and time to bring it to market.

An IPO can be a risky investment. For the individual investor it is tough to predict what the stock or shares will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, and they are therefore subject to additional uncertainty regarding their future value.

A follow-on offering (often called secondary offering) is an issuance of stock to the company's initial public offering A follow-on offering can be either of two types (or a mixture of both): dilutive and non-dilutive. A secondary offering is an offering of securities by a shareholder of the company (as opposed to the company itself, which is a primary offering). A follow on offering is preceded by release of prospectus similar to IPO.

Ways to Guarantee You’ll Lose Money in the Stock Market

There are lots of mails and sms going around which guarantee you to earn money and that too very fast.

How about ways to lose money in the stock market?

1. Do zero research on the company

Refuse to look up a single quote, balance sheet, or earnings estimate. Instead, base your entire reasoning on the length of the company’s name. Take a step further, and block access to financial websites on your computer. Only allow access to message boards so you can get stock tips to complement your six syllable stock picks.

2. Execute Market Trades

Why waste time by determining your own buy and sell prices? Just let supply and demand take its course. Give your broker the authority to execute the trade whenever it’s convenient for him or her. They’ll get the commission, while we can relax.

3. Buy High and Sell Low

Time your trades so you pay the market premium for stocks. On the flip side, sell your shares when no one wants to buy. When a stock begins to rebound, sell off your stake before you make any money.

4. Invest in companies facing bankruptcy

Even though the company can hardly pay its bills, be optimistic and invest in a glorious turnaround. Allow corporate management to use your stock as collateral in the bankruptcy courts. Then expect nothing in return but a pathetic court notice, and still wear a smile on your face.

5. Treat Proxy Statements and Annual Reports as spam

Dispose of annual reports and proxy statements as you would delete spam e-mails from your inbox. If they continue to come, change your home address to end future contact.

6. Invest in one sector

Ignore diversification, and put your money in one stock market sector. It’s easier to track, and although your risk is high, you hate following multiple stock market sectors. Pretending to follow just one is a lot easier.

7. Trade Penny Stocks

They’re cheap, and you shop for stocks like you shop for clothing in a thrift store. When searching for penny stock tips, you frequent message boards, and believe whatever stocktrader333 says.

8. Buy in one lump sum

Throw dollar cost averaging out the door, and go with lump sum trading instead. You buy or sell once, and that’s it. You almost always pay more the stock, but at least you avoided $8 in commission fees.

9. Invest in only domestic stocks

The growing international markets are complete hype, and you rather stick to domestic equities. You believe global diversification is unpatriotic.

10. Trade with fear – When stocks dip, you forgo rational thinking, and immediately sell. You’re extremely risk adverse, and would be better off placing your money in a savings account.