Page 193 - Initial Public Offering - An Introduction to IPO on Wall Street

As an insightful case study, let’s take Snap Inc., the business behind Snapchat, as an example.
Although the stock price got a nice bump instantly after the IPO, the stock was trading much
lower than the share price only three months later.

13.3 How to Invest in an IPO
Unfortunately, the decision whether or not an IPO will be accessible to retail buyers lies with
the dealers, and if they want to devote the extra time and effort putting together the required
paperwork, and taking the measures necessary to open the offer up to retail. Unless the dealer
can see a major gain from involving retail investors, they are doubtful to choose this path.

The London Stock Exchange recently released some grim figures around retail participation,
21
indicating that less than 20 percent of IPOs included a retail tranche . What would you do,
then? There are a couple of things, such as, paying heed to the rumors and making your voice
heard. Let your dealer know that you want to be engaged and try to build up some support
from your fellow investors.

Besides, you should explicitly contact the organization as they will make the final decision.
Although brokers may steer away from retail, businesses might want the participation of
individual investors. It may sound like a battle of independence, or maybe more like trying to
overthrow a fortress with a bazooka, but every struggle needs to start somewhere.

Finally, you should pre-empt this and plan to invest in the pre-IPO rounds instead of trying to
find out whether a business will have a retail tranche at the IPO. This can be accomplished by
a portfolio, an investment by a private angel, or an online trading platform.

Conclusion

The very first selling of shares sold by a corporation to the public is an initial public offering
or IPO. The business is deemed private before an IPO, with a relatively limited number of
shareholders consisting mostly of early investors (such as founders, family, and friends) and
sophisticated investors (such as angel investors or venture capitalists).

On the other hand, the public offering comprises of everyone else, every person or
institutional investor who has not been involved in the business's early days and who is
interested in purchasing the shares of the company. Until the stock of a business is sold to
the public for sale, the public cannot invest in it.

In addition to indicating that a private corporation needs more funds to fuel its growth, an
IPO is also a sign that the organization has made its mark on the big stage. However, not all
companies go public—just those that are ambitious enough to go for an IPO and become
publicly traded companies.

21 https://www.londonstockexchange.com/discover/news-and-insights/providing-capital-and-
confidence?lang=en

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