Pre-IPO investing is when you invest in a private or public limited company before it is listed on the stock market with its Initial Public Offering (IPO). An IPO is when the company starts trading on a public market for the very first time. Pre-IPO shares are not available to everyone because of a lack of information or because the public is not aware of them. Earlier Pre-IPO shares were limited to investors, private equity firms, hedge funds, and a few other groups who were aware of the Pre-IPO. But that’s no longer the problem. Anyone can invest in the pre-IPO stage by choosing the right company. Seeing the growth pattern of the company There are provisions now that a company can dematerialize their shares, and anyone can buy these shares and transfer them from one account to another with ease.
The most important reason to invest in a pre-IPO is the return that you get out of it. It can lead to maximum returns for the investment. Snapchat (NYSE: SNAP) as an example The company went public in 2017. Let’s say you invested $100 in the early days before it went public. Your $100 would have turned into $22,000. That’s a 21,900% gain! Pre-IPO companies know this risk exists. To make up for it, companies often offer shares at a discounted price. This brings in investors, but it also protects the company. If it goes public and the IPO isn’t successful, the company will still continue to raise funds from private investors.
Finding the right companies is difficult, and it’s even more difficult to find a way to invest in these companies. But there are certain ways in which you can invest in these growing companies:
1. Speak with any advisory firm specializing in capital raising and pre-IPO shares.
2. Follow news as to which companies are growing in the startup category.
3. Talk to your local bankers about companies looking for investments.
4. Let's Connect with us and build a strong business network together.
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