IPO on the Stock Market: A Beginner's Explanation

Introduction: Why IPOs Are More Important Than You Think

The Apple Story: From Garage to Billions

In 1980, a little-known company called Apple conducted its Initial Public Offering (IPO). Investors who bought shares on the first day for $22 had no idea they were holding a ticket to the future. Today, one share of Apple costs over $220—a tenfold increase over the decade. These aren’t just numbers; they are the stories of people who invested a few thousand dollars and walked away with millions.

However, Apple is far from a guarantee. More importantly: 10% of all IPOs conducted in the last 20 years have fallen by 50% or more within the first year. Investors who believed in these companies and put their money in lost half of their capital almost immediately.

Three Key Questions

What is an IPO, and why is this event capable of creating millionaires or bankrupting trusting investors? Why do companies share their ownership with millions of strangers instead of simply borrowing money from banks? And how can a beginner protect themselves in this high-stakes financial game, where the interests of all parties (investment banks, CEOs, early investors) often work against them?

This article will provide you with a comprehensive understanding of the IPO mechanism, from the moment a company decides to go public to when its shares start trading on the market. You will learn about the psychology behind first-day trading speculation, the hidden conflicts of interest that may work against you, and how a beginner can successfully invest in IPOs without making significant mistakes.

Part 1: Fundamental Concepts of IPOs

What is an IPO, and Why is it a Historic Event?

An IPO, or Initial Public Offering, is the moment when a company, previously privately held, first offers its shares to the general public. It's akin to a small restaurant owner offering city residents the chance to buy shares in the restaurant and receive a part of the profits, rather than keeping full control.

However, an IPO is much more than just selling shares. It represents a transformative threshold. After the IPO, the company must disclose its financial results quarterly, submit to regulator scrutiny, and allow investors to vote at annual shareholder meetings. Where once the company was a kingdom with the owner as the absolute ruler, it becomes a democracy where shareholders have a voice.

For a company, going public signifies its readiness for the next stage of growth. When Facebook conducted its IPO in 2012, it raised $16 billion. This money is for expansion, acquiring competitors (like Instagram), and investing in new technologies. The company obtains currency (investor money) that allows it to grow faster than it ever could by relying solely on bank loans.

IPO vs Bank Loans: Why Companies Choose Equity Over Debt

When a company needs money, it has options. The first option: borrow money from a bank. The bank will loan money at a defined interest rate, and the company must repay the loan regardless of whether it makes a profit or incurs a loss. The bank is not interested in the company's success; it merely wants to earn its interest. If the company defaults, the bank can seize its assets.

The second option: attract venture capital. An investor provides money in exchange for an equity stake in the company. If the company becomes a billion-dollar enterprise, the investor earns millions. However, venture capitalists usually demand significant influence over company decisions, appoint their members to the board, and monitor expenses.

The third option: conduct an IPO. The company offers shares to the public. Investors buy these shares not because they demand control, but because they believe in the company's potential. The company receives funds but is not required to pay them back. Most importantly, the company can issue more shares in the future to raise more money.

From Private Company to Public: The Lifecycle

A company's life typically goes through several stages. In the first stage, there's an idea— a group of friends writes an app in a garage (just like Apple and Google). Funding comes from friends, family, and the founders' personal savings. At this stage, the company has proven little, and the risk is maximal.

In the second stage, venture capital arrives. Investors see the potential and believe in the market. For example, Uber raised $200,000 from a venture fund in 2009. At this stage, the company grows, hires employees, and occupies offices but still operates at a loss. It burns through investors' cash on growth and competitive battles.

In the third stage, the company becomes profitable (or close to it). It has a solid customer base, a proven business model, and a competitive edge. At this stage, the company can conduct an IPO. Investors are no longer betting on potential but on tangibility. The company has proved it can earn money and survive in a competitive marketplace.

After the IPO, the company enters the fourth stage: maturity. It’s no longer the agile startup with an innovative mindset. It has responsibilities to millions of shareholders, quarterly reports, and annual investor meetings. Once revolutionary ideas turn into bureaucratic processes. The company either achieves long-term sustainability (like Microsoft, which went public in 1986 and continues to thrive) or begins to degrade by losing agility and innovative spirit.

Shares: Units of Ownership

When a company conducts an IPO, it’s not just selling abstract “shares.” It is creating stocks—special securities that represent a stake in the company. If the company goes public and issues 100 million shares, and you buy 1,000 shares, you own 0.001% of the company. This is not just a number on a screen. It is a real right to ownership.

This has real consequences. If the company goes bankrupt and its assets are sold, you will receive your proportionate share of that money (if anything remains after debts are paid). If the company pays dividends (a portion of profits), you will receive your share of those dividends. And if there’s an annual shareholder meeting, you can vote—one share, one vote. You can even demand the CEO’s resignation if their salary seems excessive.

But shares are also a tool for speculation. The stock price depends not only on how much money the company is making but also on how other investors feel about the future. If everyone believes the company will grow by 30% per year, the price rises. If everyone thinks the company is declining, the price falls. This creates opportunities for profits (if you bought low and sold high) and risks of losses (if you bought high and were forced to sell low).

Part 2: Participants and Roles in IPOs

The Issuing Company: Who Conducts the IPO and Why

The issuing company is the one that issues shares and conducts the IPO. Usually, this decision is made by the board of directors, who believe the company is ready for the next stage of growth. The CEO and CFO spend months preparing, meeting with investors, preparing financial reports, and convincing regulators that the company deserves this step.

For the company, an IPO is like graduating from school. There’s the potential to raise a significant amount of capital, along with responsibility to shareholders, and uncertainty regarding how the market will perceive the company. The company knows that post-IPO, it can no longer shield itself from public scrutiny. It will have quarterly results to either disappoint or delight investors. Every mistake will be scrutinized on financial sites. Every rumor about selling the company will agitate shareholders and impact the stock price.

However, the company wants to go public because it symbolizes financial freedom. It will have money to spend on expansion without having to justify expenses to a bank. It will have shares that it can use as currency to acquire other companies. And it can compensate employees with shares instead of cash—this is less expensive in the short term but creates a powerful incentive for hard work.

Syndicate of Underwriters: Investment Banks and Their Conflicts of Interest

An investment bank is an institution that assists a company in conducting an IPO. Major investment banks like Goldman Sachs, Morgan Stanley, and JPMorgan Chase have vast experience in this domain. They know all SEC (Securities and Exchange Commission) rules, all regulatory requirements, and all the nuances of the financial market.

But here lies a conflict of interest that works against the novice investor. Investment banks earn money through commissions, usually 3-7% of the total amount raised in the IPO. If a company raises $1 billion, the investment bank receives $30-70 million. This is money the investment bank is eager to maximize in any way possible.

How do they maximize their commission? One simple way is to convince the company to set as high a price for the IPO as possible. If the price is higher, the commission is higher. Thus, the investment bank pushes the company towards a higher valuation, even if that valuation doesn't align with fundamental value. However, what is advantageous for the investment bank can be detrimental for new investors, who purchase shares at inflated prices and lose money within 6-12 months.

Moreover, the investment bank often acts as the principal buyer of the IPO shares. It buys a large portion of shares and then resells them to retail investors. If the IPO is not well received, the investment bank may end up with an excess of shares it cannot sell. This poses a risk for the investment bank but also presents a reason why it can manipulate the market, creating an illusion of popularity for the IPO to attract more buyers.

Regulators: SEC, Central Banks, and Investor Protection

In the U.S., the regulator is the SEC (Securities and Exchange Commission). The SEC requires companies to disclose all material information about their operations before the IPO. This includes financial reports for several years, potential risks, conflicts of interest, biographies of executives, and legal disputes involving the company.

All this information is compiled into a document known as the S-1 (in the U.S.) or the prospectus (in other countries). This document can be 200-400 pages thick. The SEC scrutinizes it carefully, asks the company questions, and requires clarifications and justifications. The process may take several months and involves multiple exchanges of correspondence between the company and the regulator.

The SEC’s objective is not to prevent the IPO (the SEC cannot prohibit a company from going public if it meets the regulatory requirements). The goal is to ensure that investors have enough information to make informed decisions. If a company conceals or misrepresents information, the truth will soon be revealed (through financial reports, competitors, or the media), causing investors to lose money and triggering lawsuits.

In Russia, a similar role is played by the Central Bank and the Federal Financial Markets Service (FFMS). In Europe, it's the ESMA (European Securities and Markets Authority). They all aim to protect investors through transparency and mandatory disclosure requirements.

Investors: Retail vs. Institutional

Investors fall into two categories: retail (regular individuals who buy a few shares through a broker) and institutional (pension funds, insurance companies, mutual funds that manage billions of dollars).

In practice, during IPOs, most shares are purchased by institutional investors. They can buy millions of shares at once because they have the capital and are buying on behalf of their clients. Retail investors receive the leftover shares—if they are available at all. Sometimes retail investors cannot purchase IPO shares at all—at least not in the initial stage of the offering. The investment bank may first offer shares to institutional investors and only then, if any remain, to retail investors.

This is part of a system that works against the novice investor. If you’re a small investor with $10,000 in your account, you won’t get the same opportunity as Vanguard (a large mutual fund managing $7 trillion). Vanguard will secure the shares it needs at the offering price, while you may be left with scraps or none at all because the IPO gets oversubscribed too quickly.

Part 3: Preparation Process and Stages of an IPO

Pre-IPO: Financial Audit and Regulatory Approval

The IPO process begins long before the first day of trading. Several months before the announcement, the company hires an investment bank (known as the lead underwriter) that becomes its sponsor and partner. The investment bank starts preparing documents, organizing the financial reports, and preparing the company for life as a publicly traded corporation.

The first step is a financial audit. An independent auditing firm (like the Big Four: Deloitte, PwC, EY, KPMG) reviews all financial records of the company over several years. The auditor ensures that the company is not hiding massive debts, that all revenues are real and not fabricated, and that reserves are set correctly. If the auditor finds issues, the company must rectify them, which might mean reclassifying income, acknowledging hidden liabilities—everything becomes public.

The second step is preparing the prospectus (Form S-1 in the U.S.). This document reveals everything investors need to know about the company: its development history, business model, main competitors, potential risks and opportunities, financial performance for the last 3-5 years, future plans, executive compensation, material contracts, and legal disputes.

The third step is meeting with the SEC (or its equivalents in other countries). The company submits a preliminary version of the S-1. The SEC reviews it, asks questions, and demand clarifications and additional information. This back-and-forth correspondence may last several months. The SEC may ask, "Why didn’t you disclose this contract with a competitor?" or "How did you evaluate the fair value of this acquisition?" The company responds in detail, and the SEC asks more questions.

Roadshow: Presenting to Investors

After obtaining SEC approval, the roadshow begins—one of the most intense phases of IPO preparation. The CEO and CFO of the company travel the country (or the world), meet with investors, and present the company. The roadshow can last 2-4 weeks of intensive work, meeting with 15-20 mutual funds, pension funds, insurance companies, and hedge funds in each city.

The CEO shares the company's vision for the next 5-10 years. The CFO presents the numbers: revenues, profits, growth rates, margins. Investors ask tough questions: "How do you know the market will grow by 20% as you forecast when the economy is slowing?" or "Who is your main competitor, and why do you think you can outperform them?" Answers significantly influence whether investors want to purchase IPO shares in large quantities.

The roadshow is also an opportunity for the investment bank to feel out the market demand. After each meeting, the investment bank receives feedback: "No, the price is too high, we’re not interested," or "We’re very interested, let’s buy 5 million shares." Based on this feedback, the investment bank determines what price will attract sufficient interest from large investors.

IPO Day: Pricing and Subscription

After the roadshow, the investment bank and the company set the price range based on the collected information. For instance, they decide that the price should be between $20 and $25 per share because that range attracts the most interest. At the end of the day, once the roadshow concludes, the investment bank examines demand and sets the final price. If there’s huge demand (everyone wants to buy), the price goes to the upper end ($25). If demand is weak, the price drops to the lower end ($20).

After the price is set, the subscription begins—a short period (usually 1-2 hours in the evening) when investors can submit bids to buy shares. An investor might say, "I want 100,000 shares at $22." All bids are collected by the investment bank. If total demand is 10 million shares, but the company offers only 5 million, it’s 2x oversubscribed. The investment bank decides to whom to allocate the shares, typically favoring its long-term clients and large funds.

Investors who place bids at the offering price are called book runners. They receive a guaranteed number of shares. For them, an IPO is typically profitable, as the price often rises on the first trading day, allowing them to sell shares at a profit.

Listing and Commencement of Public Trading

The next morning, the company’s shares begin trading on the stock exchange—either the NYSE or NASDAQ (where tech companies are listed). The company's CEO can call the exchange and hear the company's ticker announced to the world and broadcast on news channels. For example, "Apple Computer, Inc., AAPL." This is the moment the company has dreamed of since its founding and long journey to the IPO.

On the first day of trading, everything typically happens rapidly. Investors who did not receive shares during the IPO (most retail investors) now want to buy at any cost. Demand is enormous, while supply is limited. The price jumps from the offering price (e.g., $22) to say $30 within the first hours of trading. This could mean an instant profit of 36% for those who bought at the IPO.

But this also means that the company is overvalued in an instant. If the company was valued at $22 on the IPO day (based on the investment banks and analysts’ best understanding of its fair value), a $30 valuation on the first trading day may represent a speculative bubble. Investors buying shares on the first trading day at $30 risk losing money if the price drops to $18 the following week.

Part 4: Risks and Investor Protection

Lock-Up Period: Why Prices Drop Afterwards

One of the most mysterious and lucrative phenomena of an IPO is the price drop that occurs after the lock-up period ends. What is the lock-up period? It’s a period, typically lasting 180 days (6 months), during which company insiders (founders, board members, executives, early investors who held shares before the IPO) are prohibited from selling their shares on the open market.

Why is such a restriction in place? The logic is simple and obvious: without it, insiders could immediately sell their shares on the first trading day, when the price surged by 50% or 100% from the offering price. If a founder who bought shares for $5 during early funding sees the price at $25 on the first day of trading, they could sell all their shares and make an enormous profit, sometimes several hundred times their initial investment. However, this would flood the market with a vast number of shares, causing the price to drop due to oversupply, and new investors would lose money leading to a scandal for the company.

The lock-up period protects new investors by preventing insiders from selling during the critical first 6 months. However, when the lock-up period concludes (after 6 months), insiders can finally sell, and they often do so en masse. A significant number of shares flood the market during the first week after the lock-up period concludes. Supply overwhelms demand. The price falls by 30-50%.

This phenomenon occurs with almost all IPOs. For instance, Facebook conducted its IPO in 2012 at $38. On the first day, the price rose to $40. However, following the conclusion of the lock-up period, the price fell below $20 over the following months. Investors who bought at $40 on the first trading day lost 50% within one year.

Information Asymmetry: Insiders Know More

All financial markets suffer from one fundamental inequality: information asymmetry. Insiders (those working within the company) know more than new investors. The CEO is aware that sales have dropped in the last month. The CFO knows that the primary customer (a company accounting for 30% of revenues) is considering switching to competitors. However, this information is not disclosed in the prospectus because it is not necessarily considered "material" information per the regulator.

This information gap creates a serious risk for new investors. They see appealing numbers in the prospectus, notice the growing revenue trajectory over the last three years, and believe the company is a solid long-term investment. Illustratively, insiders might know that maintaining this trajectory is unsustainable.

A classic example is the IPO of Theranos in 2015 (though it wasn’t technically a traditional IPO via a stock exchange, the principle is the same). CEO Elizabeth Holmes claimed the company developed revolutionary medical devices capable of conducting thousands of blood tests from a single drop. Investors believed and poured billions, valuing the company at $9 billion. It was later revealed that the technology didn’t work at all and the results were fabricated. Investors lost nearly everything.

Conflicts of Interest: Whose Interests Align?

Many conflicts of interest exist during an IPO that are often invisible to the new investor. The investment bank is interested in a high price (because its commission is higher—a 7% fee on $100 billion is more than a 3% fee on $50 billion). The CEO is interested in a high price (as their stock options become more valuable, and they can secure a larger salary). Early investors (venture funds) are interested in a high price (as they will earn more money upon exiting and can brag to their investors).

However, these interests may work against new investors. The new investor aims for a fair price—not too high, not too low, a price reflecting the company's real potential. When all other participants in the IPO are motivated by high prices, the new investor finds themselves on the opposite side of the deal.

This doesn’t necessarily imply explicit fraud or criminal activity. All parties may act within legal boundaries, not disclosing hidden information or providing false reports. But their interests simply don’t align. The IPO structure is set up in such a way that insiders have the advantage over new investors.

Red Flags: How to Identify a Risky IPO

Several signs should prompt a novice investor to exercise caution when analyzing an IPO and making investment decisions. An excessively high valuation is the first and most crucial danger sign. If an IPO company is valued at 50 times its annual earnings (a P/E ratio of 50), whereas competitors are valued at 20 times earnings, it may indicate a red flag. This suggests that investors expect unusually high growth in the future, and if that growth does not materialize, the price could plummet by 50-70%.

The second red flag is an unprofitable company with vague promises. If an IPO company is still losing money (incurring losses) and the investment bank claims it will become profitable "in a few years" or "once it scales," be very cautious. "A few years" often turns into "never" or "much longer than expected." Examples abound, from Uber (still unprofitable years after its IPO) to Lyft, Slack, and other "unicorns."

The third flag involves poor management and lack of experience. If the CEO is young (20s-30s), inexperienced in business, and this is their first role as the CEO of a major company, it's a risk. If they are young and articulate yet lack evidence to fulfill long-term claims, that poses a significant risk. Elizabeth Holmes (Theranos), for example, was young, attractive, and persuasive, with well-known people on the board, but did not manage to create the promised product.

The fourth flag is an unusually high fee from the investment bank. If an investment bank charges a 7% commission (instead of the typical 3-4%), it may indicate they struggle to sell the IPO and must be more aggressive in marketing it. This is a sign that demand may be weaker than stated in public communications.

The fifth flag is the use of unique metrics instead of standard financial indicators. If a company relies on proprietary metrics for measuring success ("active users," "burn rate," "adjusted EBITDA," etc.), exercise caution. The company might manipulate these metrics to appear more attractive. For instance, social media companies report "active users" instead of focusing on actual monetization and profitability, cloud companies cite their unique "burn rate" instead of standard GAAP profits.

Part 5: Practical Guide for Beginners

How to Buy Your First IPO: Step-by-Step Instructions

If you’ve decided to try investing in an IPO, here’s a step-by-step guide that works for most developed markets and can be utilized by novices.

Step 1: Choose a Broker

Not all brokers offer access to IPOs for retail investors. Major brokers like Charles Schwab, Fidelity, E*TRADE, and TD Ameritrade usually provide such access. Check with your broker to see if they offer IPO access for customers of your account size. Please note, retail investors often receive less sought-after IPO shares, while the hottest and most popular IPOs are snapped up by large pension and investment funds.

Step 2: Gather Funds

The minimum to buy into an IPO usually ranges from a few hundred dollars, but it’s better to have several thousand for diversification. Remember, you won’t be able to spend this money for several months (as they will be frozen in pre-IPO applications), so use money you don't need immediately for current expenses.

Step 3: Place an Order

When an IPO comes up that you're interested in, place your order through your broker. Specify how many shares you want to buy and at what price (or accept the price that the investment bank will set based on aggregated demand).

Step 4: Wait

After submitting your order, wait for a few days. The investment bank gathers all orders from all brokers, assesses the total demand, and sets the final IPO price. If you are “chosen” to participate in the IPO, your broker will freeze the funds in your account.

Step 5: First Trading Day

The following morning, shares begin trading on the stock exchange in the usual manner. You may observe the opening price (which could be significantly higher than the offering price). Now you can decide to sell your shares (if the price is high and you want a quick profit) or hold onto them (if you believe in their long-term potential).

Investment Strategy: Long-Term vs. Speculative

There are two primary strategies for investing in IPOs: long-term investing and short-term speculation. Speculation involves buying shares on the first trading day with the expectation of quick profit. You buy at $25, wait 30 minutes, see the price at $35, sell, and pocket a 40% profit. This is called flipping. It works when the IPO is overvalued on the first day and demand is immense. However, it can also lead to losses if the price drops swiftly or doesn’t rise at all.

Long-term investing involves buying into an IPO because you believe in the company for the next 5-10 years. You aren't concerned about the price on the first trading day; your focus is on the price and profitability of the company in 5 years. This is a more conservative strategy, but historically it has yielded better results over decades.

For beginners, long-term investing is recommended. Speculation requires skill, experience, readiness to lose money quickly, and emotional resilience. If you’re a novice, focus on understanding the company, assessing its fair value, buying at a fair price, and holding onto the shares. While it may not be as exciting in the short term, it works and builds long-term wealth.

Part 6: Real-Life Examples and Lessons

Best IPOs: Success Stories That Inspire

Microsoft (1986): From Software to Global Domination

Microsoft went public in 1986 at $21 per share. The company was young (founded in 1975), yet it had a clear strategy to become the leading provider of software for personal computers, which were starting to fill offices and homes. Founder Bill Gates was young, but his vision was clear and long-term.

Today, one share of Microsoft is worth around $400 (depending on the timing). Investors who bought in 1986 and held for 35+ years have seen returns exceeding 19,000%. Yet, remember that in 1986, it was impossible to predict that Microsoft would dominate for 30+ years and remain one of the most profitable companies globally.

Amazon (1997): A Loss-Making Company That Became an Empire

Amazon went public in 1997 at $18. The company was in the red, and there was uncertainty whether it would ever become profitable. Founder Jeff Bezos rebuffed investors and analysts who demanded profitability, insisting that long-term growth and market capture were more critical than short-term profits. Many skeptics deemed this madness.

Today, one share of Amazon is priced around $3000. This equates to over 16,000% returns after more than 25 years. It serves as one of the best examples of how long-term vision and the willingness to absorb losses can triumph over short-term skeptics and analysts. Amazon evolved from merely an online store to a cloud service provider and one of the world's most influential companies.

Google (2004): An “Overvalued” Company That Exceeded All Expectations

Google launched its IPO in 2004 at $85. The company was already profitable at the time of the IPO (which is uncommon), yet many labeled the price too high. Numerous financial experts publicly stated Google was overvalued and that the price would decline. Analysts urged to "sell."

Today, one share of Google is approximately $2600+. This reflects returns exceeding 3000% over 20 years. Google showed that even if the initial valuation seems high at the time of IPO, a solid company dominating its market with unique value can easily justify and surpass the loftiest expectations.

Worst IPOs: Lessons from Failures

Uber (2019): Hope for a Miracle, Reality of Losses

Uber went public in 2019 at $45. The company was immensely popular in culture; everyone anticipated it would be the next Amazon or Google, the next monumental success in stock market history. Investors were filled with optimism and FOMO (fear of missing out). However, on the first day, the price fell below the offering price and continued to decline for months and years.

The main issue was Uber's rapid cash burn; the company reported losses every quarter. Investors began demanding profitability, but the company was unable to achieve this despite repeated assurances. Today, Uber trades around $70-80—a total return of only 55-78% after 5 years—far less than what people expected back in 2019. This illustrates that popularity and hype do not guarantee a successful IPO and profitability.

WeWork (2019): An IPO That Never Happened

WeWork was poised to conduct an IPO in 2019 and establish itself as the next unicorn, valued at tens of billions. Yet, at the last moment, it called off the filing—citing multiple reasons: the level of losses was incredibly high (the company lost money on every space rented), CEO Adam Neumann had substantial conflicts of interest (he owned buildings that WeWork rented, creating a massive conflict), and its business model was questionable (the service was simply leasing office space with nothing revolutionary or innovative).

If this IPO had occurred, investors would have incurred significant losses. This highlights how even at the last moment, an IPO can be canceled if the risks and problems become too evident.

Pets.com (2000): A Classic Example of the Internet Bubble

Pets.com went public in 2000 during the internet bubble at $11 a share. The company sold pet products online. On the first day, the price rose to $14 due to FOMO (the fear of missing out on investing in the internet). However, the company burned cash quickly, had no path to profitability, and customer purchase sizes were small while delivery costs were high.

Within a few years, the company completely collapsed. Investors who purchased shares at $11-14 lost 100% of their money. This serves as a classic example of how speculative bubbles and group hysteria can lead to crash and total capital loss.

Conclusion: How to Start Smartly Investing in IPOs

IPOs represent a powerful tool that allows companies to grow rapidly, hire top talent, invest in innovations, and enables investors to build wealth through participation in blooming enterprises. However, they can also mislead novices who underestimate the hidden risks and conflicts of interest.

If you aim to invest in IPOs, do so gradually, with small amounts (that you can afford to lose), and only in companies you genuinely understand and believe in for the long term (5-10 years). Don’t follow the herd; avoid succumbing to FOMO (fear of missing out). Conduct your own research. Read the prospectus from start to finish, analyze several years of financial reports, look at competitors and their metrics, and evaluate fair value. And remember: the best investments are often those that nobody expects and the market undervalues. Microsoft in 1986 wasn’t an obvious choice for investors. Amazon in 1997 appeared insane to conservative investors. Google in 2004 was deemed overvalued by analysts. Yet all of them justified and surpassed expectations for investors who believed in their long-term potential and had the patience to hold the stocks for decades.

Investing in an IPO is not a gamble if you approach it wisely. It’s an opportunity to become a shareholder in a growing company at an early stage of its development as a public corporation. Utilize this opportunity wisely, analyze, think long-term, and you can create significant wealth.