The theme for this week is IPOs. An IPO, or initial public offering, refers to a stock that becomes publicly traded for the first time. When a company offers ownership for the first time to the public, it can seem like a great opportunity to get in on the ground floor, but investors should exercise caution when investing in IPOs.

So this week I’m sharing with you what you need to know when considering an investment in a newly minted publicly traded company.

Yesterday, we covered how an IPO works and today we’re going to discuss whether or not most IPOs are good investment.

What makes an IPO a potentially good investment is the potential for growth and a quick win. Many IPO companies are in a high growth phase, and so the potential for big gains in a short period of time is very appetizing for investors. And for investors who get in on the initial offer price, it’s not unusual for them to flip their shares at a handsome profit after just a few months.

It’s part of our human nature to want a quick and easy win, and who wouldn’t love the bragging rights and fat bank account of getting in on the giants like Amazon or Apple when they were still teething infants.

However, the speculative nature of IPOs should also give you pause.

We don’t need to look far to find an IPO flop. It’s a common refrain. Just look at Groupon. In 2011, Groupon went public at an initial offering price of $20/share. The stock jumped to $26/share in it’s first day of trading, but a little over year later, Groupon stock was trading below $3/share. $26 down to $3!

In more recent years, the stock has flatlined in the $3-5 range, and doesn’t shown any sign of returning to it’s IPO price any time soon.Investors were buying at $26/share...just be glad it wasn’t you, or at least I hope it wasn’t.

That’s it for today! Thanks for listening.

My name is Ashley Micciche and this is the One Minute Retirement Tip.

----------

>>> Subscribe on iTunes: https://apple.co/2DI2LSP

>>> Subscribe on Amazon Alexa: https://amzn.to/2xRKrCs

>>> Check out our blog: https://truenorthretirementadvisors.com/blog/

----------

Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, IPO, IPOs, what is an IPO, lyft IPO, uber IPO, recent IPO, pinterest IPO, initial public offering