What is that about an IPO, you say? A new company is about to go from private to public. Is this my chance to get in on the ground floor before it takes off?
These are common questions asked by public investors, institutional investors, shareholders and even beginner traders. Some basic concepts need to be explored before this investment strategy can be understood, let alone before one can risk money and make a profit from it.
IPOs and SPACs
Anyone can start a private company. In fact, such a company does not even need articles of incorporation or even an EIN, employee identification number. Private companies, however, are not traded on public exchanges like NYSE and NASDAQ. Once a private company is recognized and accepted by a publicly traded stock exchange, their entry into the market is a celebrated event referred to as an initial public offering, IPO.
There is a window of time between when the company is available for shareholders to invest in, and when it enters the market as a regular stock. This event is viewed as a golden opportunity by public investors and institutional investors because those who are lucky enough to buy these companies while they are still IPOs may be able to get them at a much cheaper price than they would have after they enter the market. Once a good company goes public and becomes a regular stock, it tends to go up much higher than the IPO price.
There are many good private companies that might not have the resources needed to become public companies and, therefore, to become a traditional IPO. The solution to this problem is the special purpose acquisition company, SPAC. A special purpose acquisition company acts as a shell company for private companies that want to become public companies. The shell company acts as a blank check company that serves to fund and assist the target company in the IPO process. Therefore, a good private company that does not have the resources to become public company can still enter the public market and become a SPAC IPO through a SPAC merger.
ICOs and SPACs
ICOs, initial coin offerings, are intended for the cryptocurrency market, including Bitcoin, Ethereum, Litecoin, Ripple, etc. Because Bitcoin has had outrageous returns over the past decade, individual investors are looking for the next Bitcoin before it becomes the next Bitcoin.
A good way to find such ICOs and buy at bargain prices is through online informational resources like Blockfolio review. Blockfolio is a crypto tracker and crypto portfolio that also functions as cryptocurrency exchange. Blockfolio users can, however, choose not to use Blockfolio’s trading services to buy their coins and non-funglible tokens on Blockfolio and simply use a crypto tracker to get the best prices from other cryptocurrency exchanges, like Coinbase, Coinbase Pro, GDAX, Gemini, Binance, Kraken, Kucoin, etc. The Blockfolio app is a mobile app that allows for tracking, trading, market information, and portfolio management.
Wall Street has always been a hyper-competitive environment with a zero-sum game in that there are clear winners and clear losers. The idea that one can have an “everybody’s a winner market with a win-win mentality” is very harmful fantasy left for money-wasters with a Peter Pan complex.
As Elon Musk has demonstrated so brutally and effectively in the crypto space, beginners and their money is soon parted. It is great idea to want to get in early on a traditional IPO, SPAC IPO, or ICO. However, beginners need to understand that there a lot of other very smart and very rich people who have the same idea. If beginners bet their money without the correct market information they will be the buyers of stocks that whales intend to sell and the sellers of stocks that whales intend to buy.