Before investing in anything, it’s wise to know what you’re getting into. Is this company profitable? Will it turn a profit after expenses like employee wages and supplies? How does its annual revenue compare with other investments out there? Knowing these questions could help ensure your investment goes where you want it to go.
Why are many people investing in IPO today? There are two reasons for this. First, it offers an excellent opportunity to invest in companies you like, and second, the returns can be very high, especially if the company does well. Its stock price goes up after its first day of trading.
You need to know several virtual numbers before trading in an IPO. Here we will go through them one by one:
What is the proposed offer amount of the company?
This number is significant as it shows how much money will be put into or out of the company after listing. If the amount is too low, not many shares will be sold post-listing and vice versa.
How much has the underwriter been given to support the IPO?
This number is essential as it means that even if you have placed your bid for, say, five shares of a company at $1.20, which is the offer price, you may not be able to buy any or less than this if the underwriters have already purchased a lot of shares before placing them on sale to the public. This will affect the post-listing share price, so you should say how much these underwriters are paid.
What time do I need to place my bid?
Some IPOs open for bidding two days before listing and close one day prior, while others keep their books open only one day before recording.
What are the discounts given to pre-IPO investors?
Typically companies that have already raised money from private investors or venture capital firms will offer a discount on their first public offering which means you should be paying less than the offer price if you invest in these companies. The bigger the pre-listing deal is, the better it is for potential investors to buy shares at a lower price.
How often do I need to pay my bid amount?
Some IPOs require bidders to immediately pay up their entire offer amount, while others allow bidding and payment in installments. It is best to check this out beforehand so that you don’t have to pay upfront.
What are the lock-in periods after listing?
Typically IPOs don’t offer a lock-in period where you can’t sell your shares, but some companies do this, especially if the business is uncertain or volatile. So make sure you check this out before investing too.
How many times can you increase/decrease your bid price?
Some IPOs allow bidders to place bids only once, while others repeatedly change recommendations. It is best to check this also before bidding for an IPO.
Finally
The above are just different numbers you should know when placing a bid for an IPO in Hong Kong, and potential investors need to understand these numbers before investing.
You should never risk all your savings on one investment, no matter how promising it may seem. The amount you invest in an IPO should be just enough to give you the freedom to invest elsewhere if the company unexpectedly takes off like wildfire or tanks. Do thorough research before investing any money; otherwise, the potential gains won’t outweigh the risks. Before investing real money, new traders should use a reputable and experienced online broker from Saxo Bank and trade on a demo account.
