Initial Public Offerings (IPOs) are the first, or initial, sale of stock to the public from a private company. This is often used by small or new companies who want to issue equity in order to gain capital and expand their company. Although less often, IPO filing is also used by large companies who are seeking public trade.
When it comes to IPO news, it is important to know the following:
- During the average Initial Public Offering, around 10% to 15% of a company is for sale.
- IPO reports show that the average initial public offering price is 13% to 15% less than normal trading price.
- The average IPO will have a lock-up period of three to 24 months. A lock-up period is a contract between the insiders of a company and the underwriter, and the contract will prohibit any selling of shares of stock for this period.
- Initial Public Offerings will greatly benefit investors who are willing to buy mass quantities of a stock before it is debuted, which can lead to triple digit gains on the initial trading day.
IPO news will show an example of success when looking at the company of FitBit. They offered over 36 million in shares during a public offering, which was valued at $741 million. Since that public offering FitBit stock has risen by 50%.
Just by looking at IPO data you can tell how it could be beneficial to both the investor, or stock owner, and the selling company. The company gains capital which allows them to expand and grow, while the investor has a stock in a growing company that can rise by over 50% to 90%. Initial Public Offerings can be a great benefit to all involved, as they have been since before the late 1990s and will continue to be in the future.