An initial public offering, or IPO, is the first time a company makes the sale of its stock available to the general public through a stock market. Researching the IPO is essential to know whether the stock is worth its opening price and to being able to predict if the stock will rise or fall in the long term. Follow these steps to research an IPO.
Instructions
1. Understand the business. Before you look at the financials, the opening stock price and the projected market capitalizations, you should have a good understanding of the core business of the company that is doing the IPO. Look at the business's products, market share and management team to see if the company looks like a sound operation or, on the hand, if it seems like it's being hyped and overvalued.
2. Read the news. You can check out a compilation of headlines regarding the company and its IPO in financial sections of websites like Yahoo!. Yahoo! gives a listing of news stories relating to the IPO, including stock purchases and sales by executives and major shareholders. Search Yahoo! Finance or a similar service with the company's name or expected ticker symbol.
3. Read the SEC filings. Companies looking to do an IPO must file papers with the Securities and Exchange Commission. The SEC makes these filings available for public view. You can get access to the filings online through financial websites or you can contact the SEC directly to get copies of the public filings. Read these documents carefully to get an understanding of the IPO's structure and major players.
4. Use an IPO research firm. If you are thinking about investing serious money in a company's IPO, you can use a dedicated IPO research firm, such as Off The Record Research, to give you an in-depth and professional report on the IPO. You might have to pay a bit of money for the research but the price is certainly worth the high quality information.
