How to Choose the Most Promising Initial Public Offering (IPO) To Invest In

The first step in determining the best IPO to buy is to assess your risk vs. reward profile. This may sound like a street cliché, but it’s true. Do you want to take a chance on a ludicrous tech IPO just because it’s a tech? no way is the right advice. That is perhaps the most important consideration for investors when making a decision. The fact that the IPO market is booming does not indicate that all IPOs will be successful. It takes some research to choose the right IPO to invest in. Personally, I’ve profited hundreds of % on initial public offerings (IPOs) that share a common bond. I’ll get to that in a minute.

Read more: how to increase chances of ipo allotment

When it comes to identifying the perfect stocks to invest in, the prospectus is the most important instrument to invest in IPO. The prospectus contains all of the legal and needed information that a company going public must provide to the Securities and Exchange Commission (SEC) as well as potential investors.

You must refer document when you are looking forward to buy stocks. It contains three crucial pieces of information that should be examined prior to purchasing an IPO. 

Underwriters

Underwriters are the most important factor in an IPO’s success, and investing in one without seeing them would be a tremendous mistake. Underwriters act as the “managers” of the IPO, bringing the private company to the public eye. You must set a NO COMPROMISE rule “If I’m going to invest in an IPO, it better has some of the reputed underwriters, or I’ll be wasting my time.”

Use of Profits

This is the second most crucial component of a successful IPO, and you should not even evaluate the underlying IPO without a proper use of proceeds statement. The phrase “use of revenues” means exactly what it says. An SEBI IPO (SEBI IPO stands for Securities and Exchange Board of India IPO) must describe what it plans to do with the proceeds of the IPO. Statements like “expanding the business” and “potential complementary business acquisitions” are what you should look for and what contributed most to make money for the company. The Securities and Exchange Board of India is the regulatory body for securities and commodity market in India under the jurisdiction of Ministry of Finance

Earnings

Earnings, as one of the most important IPO elements, are included in the document, and the company displays earnings for the previous three years and quarters. This is a sign of whether or not the company is in good shape.

So now you’re basically ready to buy and have potentially found the correct one.

You can get one in one of two ways. The first is still in the pre-market stage. Don’t bother with this procedure. This is typically saved for BSE fat cats and those with connections. Furthermore, investors that invest in an IPO in the pre-market face a lengthy “lock up period” with the IPO, which could last up to three months. That means they’re sure to incur loss if the IPO they believed was the correct one to buy unexpectedly tanked.

Additional info: how to bid for IPO