If you can get in on the ground floor of an IPO, that is getting an allocation in the initial share offering before the stock starts trading, there is evidence that you are likely to make a profit; IPOs tend to be underpriced. While this might seem like an obvious way to easy profits, there are a few crucially important things for you to consider.
References in this episode:
- Understanding the IPO share allocation process: https://www.fidelity.com/learning-center/trading-investing/trading/ipo-share-allocation-process
- Quid Pro Quo? What Factors Influence IPO Allocations to Investors?: https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12703
- IPO Allocations and New Mutual Funds: http://www.fmaconferences.org/Norway/Papers/IPO_Allocations_and_New_Mutual_Funds.pdf
- The Long-Term Performance of IPOs, Revisited: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2929733
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