Everything you need to know about IPO


Everything you need to know about IPO

Initial public offering (IPO) allows the company to enter the securities market and expand the circle of quantum code shareholders. Prior to the initial offering, when it is a private company, the circle of its shareholders is limited, and after that anyone can enter this circle. This procedure allows you to attract additional money for development, which allows you to support the business. In turn, for investors, the initial public offering is an excellent opportunity to become a co-owner of a successful company and consistently make a profit for many years.

But how do you choose the right company? How to choose a promising IPO will be discussed in this article. We will talk about what you should pay attention to in order to make a choice in favor of a particular company.

What to look for when choosing an IPO

There are several important points that an investor should consider when choosing a prospective IPO. These include:

Production of the company;

Size and growth rate of the target market;

Number of clients;

Who are the partners of the company;

Who is in the leadership?

Who are the investors?

Financial indicators;


Let's consider each of these points in more detail.

Manufactured products

All companies produce different products. Some of them may be analogues of already existing ones, in which case it is worth thinking about how interesting a product that repeats another one will be. If it represents some kind of innovation, or helps to solve important problems, then, most likely, the demand for it will be high, which will affect the company's profits in the future.Target market size and growth

It is very important to assess the size of the target market, because in the long term it will affect the growth of the company. If the forecast for market growth rates is high (for example, more than 20%), then we can assume an increase in demand for the product. Otherwise, the demand will be quickly satisfied, and the company will simply have nowhere to grow.

Number of clients

This is a very important indicator, which is usually announced during the initial public offering of the company. We are talking about both the client base itself and the dynamics of its growth. Often considered such an indicator as NRR - Net Revenue Retention Ratio. It reflects the percentage of recurring income that is withheld from customers over a given period. Based on this indicator, it is possible to judge what changes are noted in the issue of customer retention - positive or negative.

What are the relationships with other companies

Relationships with other companies can tell a lot about prospects. If there are high-profile brands and names among the partners, this indicates that the companies are trusted and considered reliable and promising. Therefore, such an IPO makes sense to take into account.

Who is at the helm

It is equally important to evaluate the company's leaders, those who are in its top management. Here it is necessary to consider each individual person. You can evaluate his background, past achievements and whether he can be truly useful for this particular company.

And who are the investors?

Information about the company's investors is an important indicator. If their list includes large and famous ones, such as Goldman Sachs or Tiger Global, this will be an advantage.You should also pay attention to the number of rounds of funding. Most companies "ripen" for an IPO after the D, E and F - rounds are held. In the case of biotechnological companies, an initial public offering is possible after rounds A and B. The risks of an IPO increase if, in addition to classical financing, shares were also sold in the Secondary market mode.

Financial indicators

Evaluation of financial performance is the basic argument in favor of an IPO. The market is not interested in companies with a long history of existence as private companies, or those who have already experienced an initial public offering, but returned to the category of private companies due to takeovers and mergers. But young businesses are of great interest and their shares can literally soar on the first day of trading. Such promising IPOs attract a large number of investors.

Company value

Lastly, take note of how much a company is worth in an IPO, and how that cost compares to similar companies, given the regional segment and business model.

What else to pay attention to

There are other factors that make it possible to judge how promising the upcoming IPO will be.

If the underwriter is well known and has an excellent reputation, this speaks in favor of an IPO.

The volume of shares planned for issue affects their value. The more shares, the cheaper they are.

At what price