Are you someone who wants to invest in IPOs to make money? In the USA, many companies launch their IPOs every month. The craze of IPs is high, but it doesn’t mean every investor makes a profit. In this article, we will explore the whole process, like what an is IPO, how you can apply for one, what tools you can use, and how you can make real profit.
This guide is perfect for those who are investing in the USA or planning to invest in. This guide is written in so a simple way that anyone can easily understand it.
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What is an IPO?
The full form of IPO is Initial Public Offering. When a private company offers its shares to the public for the first time through the stock market, it is called an IPO. Through this process, the company raises money to expand its business.
Suppose you have a small tech company. The business is running, but money is needed for growth. You decide to sell some shares of your company to the public. That is what an IPO is.
Why Do Companies Launch IPOs?
Companies launch an IPO for:
- To raise money to expand the business
- To pay old debts or loans
- To increase the branding and valuation of the company
- To repay debt
IPO gives credibility to the company and also new capital.
How to Invest in IPOs?
It is easy to invest in IPOs, you just have to follow the right steps. We are giving you the really simple guide:
1. Open an Account with the Right Broker
Investing in an IPO is not complicated, you just need to follow the right steps.
Here is the complete process:
- Robinhood
- Fidelity
- Charles Schwab
- SoFi
- Webull
Choose any broker from these and open an account with them.
2. Upcoming IPOs Track Karo
These websites are helpful to know which IPOs are coming to the market:
- Nasdaq IPO Calendar
- IPO Scoop
- MarketWatch IPO Section
- Renaissance Capital
From here, you will get an idea of which companies are launching an IPO and when.
3. Research is Very Important
Do not invest by seeing the hype of an IPO. The company’s business model, financial health, future growth, and risk factors all have to be looked at.
If the company is at a loss or the future of its business is not clear, then it would be better to avoid its IPO.
4. Apply for IPO
If you like the company for getting an IPO, then apply on the broker platform. Remember, there is no guarantee of getting shares. Sometimes the demand is so high that not everyone gets shares.
The chances of getting allocation in brokering platforms like Robinhood and SoFi are better if you are an active user.
How to Make a Profit from IPOs
There are two ways to make money from IPOs:
1. Listing Gains
Listing Gains are the main benefits. If the IPO is oversubscribed or the demand is very high, then the stock price can get a hike at the time of listing.
Example: Airbnb IPO issue price was $68, and it listed at $146, almost 100% profit.
2. Long-Term Holding
Some IPOs go flat or negative in the short term after listing, but their growth is solid in the long term.
Example: Amazon’s IPO came in 1997 at $18. Today, that stock has gone up to $3000+.
If you have patience, it is possible to create long-term wealth from an IPO.
Risks of IPO Investment
We all know that every investment has some risk, and IPOs also have; it is not different.
You should know:
- The company may be overpriced.
- Too much hype can lead to bad decisions.
- It is possible you may not get any shares.
- The market may fall on listing day, so the stock can open very low.
How Can You Choose a Good IPO?
You can follow these tips to select a good IPO:
- The company should work in a growing sector (Tech, AI, Healthcare).
- The business you are getting IPOs for should be making regular profit.
- A strong brand name is such a good sign.
- You should check the expert’s review and people’s opinions on social media.
- Inside selling should be less.
- Read the S-1 prospectus, which is available on the SEC website.
How is Tax Levied on IPO?
If you invest in an IPO and make a profit, then you have to pay capital gains tax on it.
- Short-term capital gains (under 1 year): As per your income slab (10–37%)
- Long-term capital gains (over 1 year): 0%, 15%, or 20% (income-based)
Tip: You should always fill out Form 8949 whenever you sell shares.
Can You Buy IPO Stock After the IPO?
Yes, it is possible, the stock is available in the market like other stocks. You can also buy it later.
However, experts believe it is great to wait for 2-3 weeks because between price becomes stable.
What is Pre-IPO Investing?
Pre-IPO means buying shares before the IPO is launched.
In the past, only big investors used to get this chance, but now anyone can get it using platforms like:
- EquityZen
- Forge Global
- SharePost
But it could be really risky, you should not do it without proper knowledge.
FAQs
Q: Can I Take an IPO from Robinhood?
Yes, IPO investing on Robinhood is possible, but there is no guarantee of getting shares.
Q: What is the Minimum IPO Investment?
Generally, it starts from $100–$500, depending on the terms of the broker. Some brokers allow you to start with small amounts.
Q: Do all IPOs Give a Profit?
No. Many IPOs fall even after listing. Research is important.
Final Thoughts
The one who invests carefully can really make a great profit from an IPO. Research is very important. If you are interested in investing in IPOs, then you should not follow the crowd, and you should choose only good companies.
So many investors make long-term profits or listing profits from the strong IPOs. But to be patient and smart.
Okay, so next time, whenever you see an IPO is about to launch, think, study, and then invest.
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