Do your research before investing in IPO stocks to avoid getting in at the wrong time.
IPO (Initial Public Offering)
-The first time the stock is released to the public and is available for purchase
The Problem With IPOs:
-The stock market is based on future expected growth
-IPOs need time to set up
-Preferred shareholders typically sell their shares as soon as the IPO comes out, which causes the stock to go down
-Sometimes preferred shareholders are required to hold their shares for 60-90 days, the stock can decrease at this time instead of dropping initially.
-As time go on, more shareholders can sell their stock. You need to read the find print to find out when this happens.
-Let the charts set up, give them time and do not hurry
-Don’t jump into things too quickly, IPOs should be avoided initially
-Understand why you are buying the stock. Don’t just purchase it because it’s a company you use (e.g. Zynga or Groupon)
-A better time to get in is after the stock has decreased over a period of time and begins to go back up. You don’t need to get in right away.
Example:
-Facebook (FB)
-Everyone expected FB to go way up, but it went very low because preferred shareholders sold their shares right away
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