The initial public offering market is finally starting to heat up again in the United States. This week three big named companies went public along with several others, and much more are set to begin offering shares within the next few months.
And, of course, the talk of an eventual Facebook IPO and Twitter IPO has the internet and technology sectors of the stock market all a buzz. But, that doesn’t mean that it will be simple for the average individual investor to get in on the action, but it isn’t impossible.
Two Ways To Get In On The Hottest IPOs
Buy Shares In IPO Mutual Funds and ETFs
Unless you are a high-value client with a high net worth, you will most likely not be able to directly participate in a company’s initial public offering of its shares the day or two after they come onto the market.
But, you can have access to these types of high-flying companies such as Demand Media and Nielsen Holdings, which compiles all of the television ratings and other media data that drive things like advertising rates and what we watch through mutual funds and exchange traded funds that specifically trade IPO stocks. There are funds that specifically deal with these companies initially coming onto the market which is normally inaccessible to the average individual investor.
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Wait A Few Weeks
Everyone wants to be involved in hot initial public offerings because buyers can whip the market into a frenzy for some of the biggest names when they come out. Eventually, shares of the hottest IPOs and their stock price will begin to settle down and begin to trade in a normal trading range.
For example, when Dr. Pepper Snapple Group broke away from Cadbury Schweppes, trading began at $25.80 in May 2008. It took a few weeks to stabilize, and now it has grown to a high of over $36 last month. Being patient allowed investors to reap an almost 50% increase on their investment.
That is the time to purchase the shares after this stabilization. You will have missed the entire crazy rocket ride, but you will have also missed the crazy heartburn and anxiety that often goes with it. Waiting to purchase shares after they have begun trading in a more normal fashion does not mean that you have completely missed the upside potential of a stock.
Everyone loves the idea of being one of the first in the know about a company, and many people want to get in on the ground floor of the next Google that hits the stock market. While IPOs are closed off to direct participation for most individual investors, there still are a few ways to consider investing in these potentially high flying companies.