Many companies nowadays resort to IPO in order to accelerate their growth. This offers the company a chance to sell the first set of shares to the public, once the company goes public, of course. But, there is something called pre-IPO investing, which lets you invest before the company goes public.
Stock Market News – How to Invest Pre-IPO?
This is a simple question, yet requires a complex answer. It’s not easy and can be done mostly via business connections. The more people you know, the easier it will be to get in contact with private companies. Additionally, you’ll need to speak to your stockbroker and determine the companies that offer pre-IPO investing.
Pre-IPO Investments Are Risky
Beware of the liquidity risk when investing pre-IPO. This is because the company hasn’t yet gone public and you actually don’t know how good will it fare once it does so. Even though these investments are pretty limited, there’s a huge risk factor involved and that’s something you’ve got to take into consideration.
One of the reasons is that it’s very hard to evaluate the company’s future. The managers and directors who sell the pre-IPO stocks know a lot about the company but they aren’t allowed to disclose the info before it goes public. This means that the amount of info is pretty limited.
Stock Tokenization – A Solution for Low Liquidity
The problem regarding the low liquidity is pretty common in pre-IPO stocks. The solution is called Stock Tokenization. This refers to the conversion of traditional company shares into cryptocurrencies, which then allow for liquidity in the IPO markets.
In the broader markets, no. However, there are secondary markets that allow for transactions of private investments. The regulators have made the rules strict as of the last couple of years, so it’s much harder to find private secondary markets.
Don’t make rash decisions with the pre-IPO stocks. It’s very risky and requires more than basic knowledge and experience. Source: valuestockguide