IPO on the Stock Market: An Explanation for Beginners

Introduction: Why IPOs Matter More Than You Think

The Story of Apple: From Garage to Billions

In 1980, a little-known company named Apple conducted its Initial Public Offering (IPO). Investors who bought shares on the first day at $22 had no idea they were holding a ticket to the future. Today, a single share of Apple costs over $220 — a tenfold increase over a decade. These figures are not just numbers but stories of individuals who invested a few thousand dollars and gained millions.

However, Apple is by no means a guarantee. A more significant statistic is that 10% of all IPOs conducted in the last 20 years have fallen by 50% or more within the first year. Investors who believed in these companies and put their money in lost half of their capital almost immediately.

Three Key Questions

What is an IPO, and why can this event either create millionaires or bankrupt trusting investors? Why do companies share their ownership with millions of strangers instead of simply borrowing money from a bank? And how can a newcomer protect themselves in this high-stakes financial game, where the interests of all participants (investment banks, CEOs, early investors) often work against theirs?

This article will provide you with a comprehensive understanding of the IPO mechanism, from the moment a company decides to go public until its shares start trading on the market. You will learn about the psychology behind day-one trading speculation, the hidden conflicts of interest that may work against you, and how a newcomer can successfully invest in IPOs without making major mistakes.

Part 1: Fundamental Concepts of IPOs

What is an IPO and Why is it a Historic Event?

An IPO, or Initial Public Offering, is the moment when a privately-held company first offers its shares to the public. It is akin to a small restaurant owner inviting city dwellers to buy shares in their establishment and share in the profits rather than keeping full control.

However, an IPO is much more than just selling shares. It marks a transformation threshold. After an IPO, a company must disclose its financial results every quarter, open itself to regulatory scrutiny, and allow investors to vote at annual shareholder meetings. Where previously the company was a kingdom with the owner as the absolute ruler, post-IPO it becomes a democracy where shareholders have a say.

For a company, an IPO is a recognition that it has matured for the next stage of growth. When Facebook went public in 2012, it raised $16 billion. This money was used for expansion, for acquiring rivals (like Instagram), and for investment in new technologies. The company obtains currency (investor money), enabling it to grow faster than it ever could have relying solely on bank loans.

IPO vs Bank Loan: Why Companies Choose Equity Over Debt

When a company needs money, it has options. The first is to borrow from a bank. The bank will lend money at a certain interest rate, and the company must repay it regardless of whether it is profitable or bankrupt. The bank isn’t concerned with the company’s success — it simply wants to receive its interest. If the company fails to repay, the bank can seize its assets.

The second option is to attract venture capital. An investor provides money in exchange for equity in the company. If the company becomes a billion-dollar entity, the investor makes millions. However, venture investors typically demand significant influence over company decisions, appoint their people to the board, and control expenditures.

The third option is to conduct an IPO. The company offers shares to the public. Investors buy not because they demand control but because they believe in the company’s potential. The company receives money but is not obligated to repay it. Importantly, the company can issue more shares in the future to raise additional funds.

From Private Company to Public: The Lifecycle

A company typically goes through several stages in its lifecycle. During the first stage, it is an idea — a group of friends writing an app in a garage (as was the case with Apple and Google). Funding comes from friends, family, and personal savings of the founders. At this stage, the company has proven almost nothing, and risk is at its maximum.

During the second stage, venture capital enters the picture. Investors see potential and believe in the market. For instance, Uber raised $200,000 from a venture fund in 2009. At this stage, the company grows, hires employees, takes on an office, but remains unprofitable. It burns through investor money on expansion and competitive battles.

In the third stage, the company becomes profitable (or close to it). It has a solid customer base, a proven business model, and a competitive edge. At this stage, the company can go public. Investors now believe not in potential but in reality. The company has proven it can make money and thrive in a competitive market.

After the IPO, the company enters the fourth stage: maturity. It is no longer a start-up focused on innovation. It has responsibilities to millions of shareholders, quarterly reports, and annual meetings with investors. Once revolutionary ideas transform into bureaucratic processes. The company either becomes a long-term success (like Microsoft, which went public in 1986 and continues to thrive) or begins to decline, losing agility and innovative spirit.

Shares: Units of Ownership

When a company conducts an IPO, it does not simply sell abstract "shares." It creates stock - special securities that represent a share of ownership in the company. If a company goes public and issues 100 million shares, and you buy 1,000 shares, you own 0.001% of the company. This is not just a number on a screen. It is a real ownership right.

This has real consequences. If the company goes bankrupt and its assets are sold, you will receive your share of that money (if anything remains after debts are paid). If the company pays dividends (part of the profit), you receive your share of the dividends. And if there is an annual shareholders' meeting, you get to vote — one share, one vote. You may even call for the CEO’s resignation if their salary seems too high.

But a share is also a tool for speculation. A stock's price depends not only on how much money the company makes but also on what other investors think about its future. If everyone believes the company will grow at 30% a year, the price goes up. If everyone thinks the company is declining, the price falls. This creates opportunities for profit (if you buy low and sell high) and risk of losses (if you buy high and are forced to sell low).

Part 2: Participants and Roles in IPOs

The Issuer Company: Who Conducts the IPO and Why

The issuer company is the one issuing shares and conducting the IPO. Typically, this decision is made by the board of directors, which believes the company is ready for the next stage of development. The CEO and CFO spend months in preparation, meeting with investors, preparing financial reports, convincing regulators that the company merits this step.

For the company, an IPO is akin to a graduation. It presents an opportunity to raise a vast amount of capital alongside the responsibility to shareholders, with uncertainty about how the market will perceive the company. The company knows that post-IPO, it cannot shield itself from public scrutiny. Each quarter, it will need to either impress or disappoint investors with new figures. Every mistake will be debated on financial websites. Every rumour about the company’s sale will concern shareholders and impact the stock price.

Yet, the company desires an IPO because it signifies financial freedom. It will have funds it can use for expansion without needing to justify the spending to a bank. It will have shares it can use as currency to acquire other companies. And it can pay employees in shares instead of salary — this is cheaper in the short term but creates a strong incentive for hard work.

The Underwriter Syndicate: Investment Banks and Their Conflicts of Interest

An investment bank is an institution that assists a company in conducting an IPO. Large investment banks, such as Goldman Sachs, Morgan Stanley, and JPMorgan Chase, have immense experience in this area. They are well-versed in all SEC rules, regulatory requirements, and the ways of the financial market.

However, this is where a conflict of interest comes into play, which works against the newcomer. An investment bank earns money through commissions, typically 3-7% of the total amount raised in the IPO. If a company raises $1 billion, the investment bank earns between $30-70 million. This is money the investment bank aims to maximise by any means.

How does one maximise commissions? A simple way is to persuade the company to set as high a price for the IPO as possible. A higher price means a higher commission. Thus, the investment bank encourages the company toward a higher valuation, even if that valuation does not align with the company's fundamental value. What is good for the investment bank may be detrimental to the new investors buying shares at an inflated price, only to lose money within 6-12 months.

Moreover, the investment bank often holds a significant portion of the IPO shares. It buys a large chunk of shares and then resells them to retail investors. If the IPO is not popular, the investment bank can be left with a pile of unsold shares. This poses a risk for the investment bank, but it also explains why it might manipulate the market to create the illusion of an IPO’s popularity, attracting more buyers.

Regulators: SEC, Central Banks, and Investor Protection

In the USA, the regulator is the SEC (Securities and Exchange Commission). The SEC requires a company to disclose all material information about its operations prior to the IPO. This includes financial reports from recent years, potential risks, conflicts of interest, biographies of executives, and any ongoing litigation involving the company.

All of this information is compiled into a document known as an S-1 (in the US) or a prospectus (in other countries). This document can range from 200 to 400 pages. The SEC scrutinizes it closely, asks the company questions, and demands clarifications and justifications. This process can take several months and involves multiple rounds of correspondence between the company and the regulator.

The SEC's goal isn't to prevent an IPO (the SEC cannot block a company from going public if it meets requirements). The goal is to ensure that investors have enough information to make informed decisions. If a company conceals information or misrepresents it, the truth will soon emerge (through financial reports, competitors, media), investors will lose money, and lawsuits will follow.

In Russia, a similar role is played by the Central Bank and the Federal Financial Markets Service (FFMS). In Europe, it is the ESMA (European Securities and Markets Authority). All of them pursue one aim: protecting investors through transparency and disclosure requirements.

Investors: Retail vs Institutional

Investors can be classified into two groups: retail (ordinary individuals who purchased a few shares through a broker) and institutional (pension funds, insurance companies, mutual funds that manage billions of dollars).

In practice, during an IPO, the bulk of shares are usually purchased by institutional investors. They can buy millions of shares at once because they have the capital and are buying on behalf of their clients. Retail investors receive the remaining shares — if any are left at all. Sometimes retail investors may not purchase shares during the IPO — at least not during the initial placement. The investment bank may first offer shares to institutional investors, only then, if there are leftovers, to retail investors.

This is part of a system that works against the newcomer. If you are a small investor with $10,000 in your account, you will not get the same opportunity as Vanguard (a large mutual fund with $7 trillion under management) or BlackRock. Vanguard will acquire the necessary number of shares at the offering price while you will be left with scraps or nothing at all because the IPO sells out too quickly.

Part 3: The Preparation Process and Phases of an IPO

Pre-IPO: Financial Audit and Regulatory Approval

The IPO process begins long before the first day of trading. Several months before the announcement, the company hires an investment bank (called the lead underwriter), which becomes its sponsor and partner. The investment bank starts preparing documents, fixing financial reports, and getting the company ready for life as a public corporation.

The first step is a financial audit. An independent audit firm (like the Big Four: Deloitte, PwC, EY, KPMG) examines all of the company's financial records from recent years. The auditor ensures that the company is not hiding large debts, that all income is genuine and not fabricated, and that reserves are appropriately established. If the auditor uncovers issues, the company must resolve them. This may involve reclassifying income, acknowledging hidden liabilities, with everything becoming public.

The second step is to prepare the prospectus (S-1 form in the US). This is a document that discloses everything that investors need to know about the company: its developmental history, business model, major competitors, potential risks and opportunities, financial results from the past 3-5 years, future plans, executive compensation, material contracts, and any litigation.

The third step involves meeting with the SEC (or its equivalents in other countries). The company submits a draft version of the S-1. The SEC reads it, poses questions, and requires clarifications and additional information. The back-and-forth correspondence can last several months. The SEC may ask: "Why didn’t you disclose this contract with a competitor?" or "How did you estimate the fair value of this acquisition?" The company responds in detail, leading to further inquiries from the SEC.

Roadshow: Presenting to Investors

Once the SEC gives its approval, the roadshow begins — one of the most intensive phases of IPO preparation. The CEO and CFO of the company travel across the country (or even worldwide), meeting with investors and presenting the company. The roadshow may last 2-4 weeks of intensive work. In each city, there are meetings with 15-20 mutual funds, pension funds, insurance companies, and hedge funds.

The CEO shares the company's vision for the next 5-10 years. The CFO provides the figures: revenues, profits, growth rates, margins. Investors ask challenging questions: "How do you know the market will grow by 20% as you project if the economy is slowing down?" or "Who is your main competitor and why do you think you can outpace them?" The responses affect whether investors are interested in purchasing large volumes of IPO shares.

The roadshow also allows the investment bank to gauge market demand. After each meeting, the investment bank receives feedback: "No, the price is too high; we’re not interested," or "We are very interested; let’s arrange for me to buy 5 million shares." Based on this feedback, the investment bank determines which price will attract enough interest from major investors.

IPO Day: Setting the Price and Subscription

After the roadshow concludes, the investment bank and the company establish a price range based on gathered information. For instance, they might decide that the price should be between $20 and $25 per share because this range attracts maximum interest. At the end of the day, once the roadshow finishes, the investment bank assesses demand and sets the final price. If demand is immense (everyone wants to buy), the price moves toward the high end of the range ($25). If demand is tepid, the price is closer to the lower end ($20).

After establishing the price, the subscription period begins — a brief window (usually 1-2 hours in the evening) when investors can submit requests to buy shares. An investor might say, "I want 100,000 shares at $22." All requests are collected by the investment bank. If the total demand totals 10 million shares, while the company is offering only 5 million, this leads to a 2x oversubscription. The investment bank decides who receives the shares, typically granting them to its regular clients and large funds.

Investors who submit requests at the offering price are termed book runners. They receive a guaranteed number of shares. For them, an IPO is usually profitable as the price tends to rise on the first trading day, allowing them to sell shares for profit.

Listing and Start of Public Trading

The next morning, the company’s shares begin trading on the exchange — either the NYSE (New York Stock Exchange) or NASDAQ (mostly for technology companies). The CEO of the company may call the exchange and hear the company’s ticker symbol announced to the world and broadcasted across all news channels. For instance, "Apple Computer, Inc., AAPL." This is the moment the company dreamed of since its founding and long journey to an IPO.

On the first day of trading, everything typically occurs simultaneously and at an accelerated pace. Investors who didn't get shares during the IPO (most retail investors) now want to buy at any cost. Demand is enormous, while supply is limited. The price may jump from the offering price (e.g., $22) to, say, $30 within the first hours of trading. This can mean an instant profit of 36% for those who bought during the IPO.

However, it may also indicate that the company is overvalued in an instant. If the company was valued at $22 on IPO day (based on the best understanding of fair value by investment banks and analysts), a $30 valuation on the first trading day may represent a speculative bubble. Investors who purchase shares on the first trading day at $30 risk losing money if the price falls to $18 the following week.

Part 4: Risks and Investor Protection

Lock-up Period: Why Prices Fall After It Ends

One of the most mysterious and profitable phenomena in IPOs is the price drop after the lock-up period ends. What is a lock-up period? It is a timeframe, usually lasting 180 days (6 months), during which company insiders (founders, board members, executives, early investors who held shares before the IPO) are prohibited from selling their shares on the open market.

Why is such a restriction in place? The logic is simple and clear: without it, insiders could immediately sell their shares on the first trading day when the price surged by 50% or 100% from the offering price. If a founder, who bought shares for $5 during early funding, sees a price of $25 on the first trading day, they could sell all their shares and make a massive profit several hundred-fold. However, this would flood the market with an enormous volume of shares, driving down the price due to oversupply, leading new investors to lose money and the company to be embroiled in scandal.

The lock-up period protects new investors by preventing insiders from selling during the critical first 6 months. However, once the lock-up period is over, the insiders can finally sell. And they often do so en masse. A massive quantity of shares hits the market within the first week following the lock-up period's conclusion. Demand cannot keep up with the supply. The price may drop by 30-50%.

This occurs with almost all IPOs. For example, Facebook conducted its IPO in 2012 at $38. On the first day, the price rose to $40. But after the lock-up period ended, the price plummeted below $20 within months. Investors who bought at $40 on the first trading day lost 50% within one year.

Information Asymmetry: Insiders Know More

All financial markets suffer from one fundamental inequality: information asymmetry. Insiders (those who work at the company) know more than new investors. The CEO understands that sales have dropped in the last month. The CFO knows that a major client (which accounts for 30% of revenues) is considering switching to competitors. However, this information is not disclosed in the prospectus as it may not necessarily be considered "material" information according to the regulator's definition.

This information gap poses a serious risk to new investors. They see attractive figures in the prospectus, observe a growing revenue trajectory over the last three years, and believe the company is an excellent long-term investment. Yet, insiders may realise that maintaining this trajectory is impossible.

A classic example is the IPO of Theranos in 2015 (though technically it was not a traditional IPO through an exchange, but the principle remains the same). CEO Elizabeth Holmes claimed the company had developed a revolutionary medical device that could conduct thousands of tests from a single drop of blood. Investors believed her and poured in billions of dollars, leading to the company’s valuation of $9 billion. However, it later emerged that the technology didn’t work at all, and the results had been fabricated. Investors lost nearly everything.

Conflicts of Interest: Whose Interests Align

Multiple conflicts of interest arise during an IPO that often remain invisible to the new investor. Investment banks are interested in a high price (as their commission is higher — 7% of $100 billion is more than 3% of $50 billion). The CEO is interested in a high price (because their stock options become more valuable, potentially yielding a higher salary). Early investors (venture funds) are interested in a high price (so they can cash out more and boast to their investors).

Yet, these interests can work against those of new investors. A new investor hopes for a fair price — not too high, not too low, a price that reflects the company's actual potential. When other IPO participants seek a high price, the new investor finds themselves on the opposite side of the transaction.

This does not necessarily imply overt fraud or criminal activity. All participants can act within the law, not disclosing hidden information or providing false reports. However, the interests simply do not align. The IPO structure is designed in such a way that the advantage lies with the insiders, not new investors.

Red Flags: How to Identify a Risky IPO

Several signs should alert newcomers to be cautious when analysing an IPO and deciding where to invest their money. An excessively high valuation is the first and foremost warning sign. If a company’s IPO is valued at 50 times its annual earnings (P/E ratio = 50), while rivals are valued at 20 times their earnings, this can signal a red flag. This indicates that investors expect unusually high growth in the future, and if that growth does not materialise, the price could drop by 50-70%.

The second red flag is a loss-making company with vague promises. If a company is IPO-ing while still unprofitable (losing money) and the investment bank assures that it will become profitable "within a few years" or "when it reaches scale," exercise caution. "A few years" often turns into "never" or "far longer than anticipated." Examples range from Uber (not profitable even today, many years post-IPO) to Lyft, Slack, and other "unicorns."

The third flag is poor management and lack of experience. If a CEO is young (in their 20s-30s), inexperienced in business, and this is their first job as a CEO of a large company, it’s a risk. If they are young and very persuasive in their narrative but provide no evidence that they can deliver on long-term promises, this poses a significant risk. Examples include Elizabeth Holmes (Theranos), who was young, attractive, charismatic, had high-profile individuals on her board, but failed to produce the promised product.

The fourth flag is an unusually high fee charged by the investment bank. If an investment bank charges a 7% fee (instead of the usual 3-4%), this may indicate that it is struggling to sell the IPO and must be more aggressive in its marketing. This is a sign that the demand may be weaker than reported in public communications.

The fifth flag involves the use of unique metrics rather than standard financial indicators. If a company uses proprietary metrics to measure success ("active users", "burn rate", "EBITDA without adjustments"), be cautious. The company may manipulate these metrics to present itself in a more attractive light. Examples include social networks reporting "active users" instead of real monetisation and profitability or cloud companies referencing their own "burn rates" instead of standard GAAP profits.

Part 5: Practical Guide for Newcomers

How to Buy Your First IPO: Step-by-Step Instructions

If you have decided to try investing in an IPO, here is a step-by-step guide that works for most developed markets and can be employed by newcomers.

Step 1: Choose a Broker

Not all brokers offer access to IPOs for retail investors. Major brokers such as Charles Schwab, Fidelity, E*TRADE, and TD Ameritrade typically provide such access. Check with your broker whether it offers IPO access for your account size. Remember that retail investors often receive less popular IPO shares; the hottest and most sought-after IPOs go to large pension funds and investment funds.

Step 2: Gather Funds

The minimum to buy an IPO usually amounts to a few hundred dollars; however, having several thousand for diversification is prudent. Keep in mind that you will not be able to spend this money for several months (as it will be frozen in the pre-IPO application), so use funds that you do not need for immediate current expenses.

Step 3: Submit Your Application

When an IPO you are interested in appears, submit your application through your broker. Specify how many shares you want to purchase and at what price (or indicate that you accept the price set by the investment bank based on collected demand).

Step 4: Wait

After submitting your application, wait for a few days. The investment bank gathers all applications from various brokers, determines the total demand, and establishes the final IPO price. If you are "chosen" to participate in the IPO, your broker will freeze the necessary funds from your account.

Step 5: First Trading Day

The next morning, the shares begin trading on the exchange as usual. You will see the opening price (which could be significantly above the offering price). Now you can sell shares (if the price is high and you want to secure a quick profit) or hold them (if you believe in their long-term potential).

Investment Strategy: Long-Term or Speculative

There are two primary strategies for investing in IPOs: long-term investing and short-term speculation. Speculation involves purchasing on the first day of trading with the expectation of quick profit. You buy at $25, wait 30 minutes, see the price at $35, and sell, achieving a 40% profit. This is known as flipping. It works when the IPO is overvalued on day one and demand is immense. However, it can also lead to losses if the price drops quickly or fails to rise at all.

Long-term investing entails purchasing an IPO because you believe in the company over 5-10 years. You’re not concerned about the price on the first trading day. Instead, you focus on the price and profit of the company 5 years down the line. This is a more conservative strategy but historically yields better results over decades.

For a newcomer, long-term investing is advisable. Speculation requires skill, experience, a readiness to lose money quickly, and emotional resilience. If you are a newcomer, focus on understanding the company, assessing its fair value, buying at a fair price, and holding onto the shares. This may not be the most exciting in the short term, but it works and builds long-term wealth.

Part 6: Real-Life Examples and Lessons

The Best IPOs: Inspiring Success Stories

Microsoft (1986): From Software to Global Dominance

Microsoft went public in 1986 at $21 per share. The company was young (founded in 1975) but had a clear strategy — to become the primary software provider for personal computers, which were starting to fill offices and homes. Founder Bill Gates was young, but his vision was clear and long-term.

Today, a single share of Microsoft is worth around $400 (varies over time). Investors who purchased shares in 1986 and held for over 35 years have seen returns exceeding 19,000%. Yet, remember that in 1986, it was impossible to predict that Microsoft would dominate for over 30 years and remain one of the world’s most profitable companies.

Amazon (1997): A Loss-Making Company that Became an Empire

Amazon went public in 1997 at $18. The company was unprofitable, and it was unclear whether it would ever become profitable. Founder Jeff Bezos dismissed investors and analysts demanding profitability, arguing that long-term growth and market capture took precedence over short-term profits. Many skeptics deemed this insane.

Today, a share of Amazon is approximately $3,000 (also depends on the moment). The total return amounts to over 16,000% for more than 25 years. This is one of the best examples of how long-term vision and a willingness to absorb losses can overcome short-term sceptics and analysts. Amazon has evolved from merely an online store to a cloud services provider and one of the most influential companies globally.

Google (2004): An "Overvalued" Company that Met Expectations

Google held its IPO in 2004 at $85. The company was already profitable at the time of its IPO (which is rare), but people and analysts claimed the price was too high. Many financial experts publicly stated that Google was overvalued and that its price would fall. Analysts recommended "sell."

Today, a Google share is valued at around $2,600+. This results in over 3,000% returns over 20 years. Google demonstrated that even if the initial offering price seems high, a good company that dominates its market and provides unique value can effortlessly meet and exceed the most ambitious expectations.

The Worst IPOs: Lessons from Failures

Uber (2019): Expectation of a Miracle, Reality of Losses

Uber went public in 2019 at $45. The company was extremely popular in culture, with many believing it would be the next Amazon or Google, the next great success story in stock market history. Investors were overflowing with optimism and FOMO. However, on the first day, the price dropped below the offering price and continued to fall for months and years.

The primary reason: Uber was burning through cash at a rapid pace, posting losses every quarter. Investors began demanding profitability, yet the company failed to achieve it despite numerous promises. Today, Uber trades at approximately $70-80 (amassing returns of only 55-78% over 5 years), far below the expectations set in 2019. This illustrates that popularity and hype do not guarantee a successful IPO and profitability.

WeWork (2019): An IPO That Never Happened

WeWork was prepared to conduct an IPO in 2019 and become the next unicorn, valued in the tens of billions. However, at the last minute, the offer was withdrawn. The reasons were numerous: the level of losses was extraordinarily high (the company lost money on every rented space), CEO Adam Neumann faced significant conflicts of interest (he owned buildings that WeWork leased, creating a substantial conflict), and the business model was questionable (the service was essentially just leasing office space, with nothing revolutionary or innovative).

If this IPO had occurred, investors would have lost considerable sums. This showcases that even at the last moment, an IPO can be cancelled if the risks and issues are too apparent.

Pets.com (2000): A Classic Example of the Internet Bubble

Pets.com went public in 2000 during the internet bubble at $11 per share. The company sold pet products online. On its first day, the price surged to $14 amid FOMO (fear of missing the opportunity to invest in the internet). However, the company was rapidly burning cash and had no clear path to profitability; the average order size was small, and shipping costs were high.

Within a few years, the company completely collapsed. Investors who purchased shares at $11-14 lost 100% of their investment. This serves as a classic example of how speculative bubbles and groupthink lead to failure and total capital loss.

Conclusion: How to Smartly Start Investing in IPOs

IPOs are a powerful tool that allows companies to grow rapidly, hire top talent, invest in innovation, and enable investors to accumulate wealth by participating in growing companies. However, they can also be a trap for newcomers who do not understand the hidden risks and conflicts of interest.

If you want to invest in IPOs, do so slowly, with small amounts (that you can afford to lose), and only in companies you truly understand and believe in for the long term (5-10 years). Avoid following the herd and being influenced by FOMO (fear of missing out). Conduct your own research. Read the prospectus from beginning to end, analyse financial reports from recent years, examine competitors and their metrics, and assess fair value. And remember: the best investments are often those that no one expects and that the market underestimates. Microsoft in 1986 was not an obvious pick for investors. Amazon in 1997 seemed insanity for conservative investors. Google in 2004 was deemed overvalued by analysts. Yet they all fulfilled and exceeded the expectations of those investors who believed in their long-term potential and had the patience to hold their shares for decades.

An IPO is not a gamble if approached wisely. It is an opportunity to become a shareholder in a growing company at an early stage of its development as a public corporation. Use this opportunity wisely, analyse diligently, think long-term, and you can build substantial wealth.