So you say you want to invest in IPOs? Maybe make a fortune on the next
Facebook? Well, good luck.
The fact is,
most IPO stocks underperform the market for several years after going public. That's not surprising. After all, when a company sells stock to the public in an "initial public offering," its goal isn't to give
you a quick profit. Its goals are more often to:
- help its early, private shareholders cash out (a strange move if they expect the stock to go up);
- help the company's founders monetize their stock;
- raise cash to pay down debts the company had to run up pre-IPO; and
- raise cash to fund ongoing losses -- the ones that got the business in debt in the first place.
These are just a few reasons why Warren Buffett tells investors that they're better off staying away from IPOs than investing in them, calling IPOs in general "
a stupid game." That being said, if you're determined to invest in IPOs, here's how to do it.
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Seems like IPO's are risky,I've heard of some great stories though. But with the food industry going in this direction with millenials,this could be big.