IPO pros and cons

Definition: Initial public offering is the process by which a private company can go public by sale of its stocks to general public . It could be a new, young company or an old company which decides to be listed on an exchange and hence goes public.

“You should sell an IPO stock only when the company misses on earnings and reduces growth expectations during the first few sets of earnings reports ,” Schuster says. This may take several years to materialize, so for long-term investors, it may be worth it to wait and see how the company performs over time.

You shouldn’t invest in an IPO just because the company is garnering positive attention . Extreme valuations may imply that the risk and reward of the investment is not favorable at the current price levels. Investors should keep in mind a company issuing an IPO lacks a proven track record of operating publicly.

An initial public offering (IPO) is when a private company becomes public by selling its shares on a stock exchange . Private companies work with investment banks to bring their shares to the public, which requires tremendous amounts of due diligence, marketing, and regulatory requirements.