True, not every IPO strikes gold, but it’s not uncommon for a stock to double just months after going public.
Unless you were hiding in a cave with no internet, you’d already know that 2021 was the year of IPOs. Over 51 IPOs hit the Indian market by October, raising a total of Rs 90,000 crore.
And for the investor who knows how to pick the winning IPOs, it has been a dream come true to amass wealth both in the short and long term. Well, not every IPO strikes gold; some have been dud because the company failed to perform as expected.
But it’s not uncommon for a stock to double just months after going public.
Let me unpack this a bit and show you the 4 unique benefits of investing in the IPOs.
1: Early-bird Investor advantage
With an IPO, you invest at the time the company transitions from private to public. This means you are investing in the hottest stocks of the company, especially when they’re moving up the fastest with a massive potential to grow and expand. And suppose the company you invested in offers cutting edge, breakthrough solutions, and it explodes out of the gate and sustains the growth. You gain massive profit windfall. Some IPOs are worth their diamond for the right time investors. For instance, Amazon.com Inc. floated an IPO in 1997 and priced each share at $18. So if you had invested $5,000 in Amazon’s IPO, you know how much it’s worth today in December 2021.
2: Discounted Investment. Fat profits
Many companies offer their shares at the lowest price when they float their IPOs. And it’s because they may be small, fast-growing, under-the-radar companies. But as the company grows and news breaks, the share price may skyrocket. And you miss out on the only chance to buy its stock at a much lesser price than its true value. Look at Paras Defence And Space Technologies Limited. The company went public on Oct 1st, 2021, and the issue price was Rs 175. The current price at NSE is Rs 735.45. Which means it spiked 320% in just a month.
3: More information to make a better decision
When a company floats an IPO, it has to provide a detailed prospectus with information like its past performance, assets, liabilities, financial status, risks, growth, and future plans. Moreover, the company has to clearly mention the price per security in the IPO order document ensuring total transparency. So you as a retail investor also get the same details as the big investors. This allows you to make smart, savvy decisions.
4: Massive momentum. Exponential Growth