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Investment
IPO Investing
Buying shares in a company at or around its Initial Public Offering — the moment it first lists on a stock exchange and becomes available for public trading.
There are two ways to invest in IPOs. Pre-IPO allocation: through a broker that's part of the underwriting syndicate, some retail investors can apply for shares at the IPO price. Allocations are typically limited and prioritised for institutional investors and high-net-worth clients. Buying on the open market: anyone can buy shares once trading begins — but you're paying market price, which is often significantly above the IPO price after first-day excitement.
Research consistently shows that the average IPO underperforms the market over the first three to five years after listing. The IPO process is designed to benefit the company (raising capital at the best possible price) and the institutional investors who get preferential allocations — retail investors buying on day one at inflated prices are often the last to benefit. Exceptions exist — some IPOs go on to be extraordinary long-term investments. But the base rate of IPO outperformance is poor enough that most financial advisors recommend waiting 6-12 months for post-IPO hype to settle before evaluating the stock on its actual business merits.