What Are the Best Ways to Research an IPO?

Geri Terzo
Geri Terzo
Woman holding a book
Woman holding a book
Woman holding a book

When a company issues shares in the public markets for the first tine in an initial public offering (IPO), it is a new venture both for the issuing company and investors. To take some of the guesswork out of placing a bet on a new issue, there are ways to research an IPO. Before a company can sell shares in the stock market, it must file a formal document with the regulatory agency in its region. Investors can get a sense of the financial condition of a company by reading the filing.

Certain details that will offer investors a glimpse into the financial health of a company are disclosed in a regulatory filing leading up to an offering, which can help a prospective investor to research an IPO. In the U.S., this form is known as an S-1 filing, and it is issued with the Securities and Exchange Commission. The expected value of the total offering is outlined in addition to the value of each price per share or a range expressing the highest and lowest price desired. Using these details, an investor can compare the offerings of other companies in a similar sector and see how the size of the offering holds up.

There is a wealth of information that is disclosed in a public filing, some of which is vital to research an IPO. Prospective investors can learn about business operations and the primary revenue drivers at a company. Details such as the number of employees at a company and the phone number to reach investor relations, a department that serves as a liaison between the company and investors, are all available. If a company has a history of at least five years, information about the finances of the company over that period of time are offered. Also, the anticipated financial impact that an IPO will have on the company is outlined.

Before an IPO debuts in the public markets, the financial analyst community may weigh in on the prospects for the stock. Investors can read about these reviews and IPO analysis in financial newspapers and magazines. Also, there are economic websites that might very well quote and cite expert analysts who have experience in the IPO market or in the industry in which the new shares will trade. Learning about the management team of a company is another way to research an IPO. Top executives often have career histories including time spent at other companies, and learning about their previous success is another way to research an IPO.

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