How to Profit in the IPO World

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Over the past few months there has been a lot of talk about conducting Initial Public Offerings or IPO’s. Recently, Twitter had one and a lot of other companies have already been through this. IPO shares are, indeed, a golden ticket to earning quick profits, but companies that hold them, allot the shares only to major investment firms and their most valuable clients. So how do you bring yourself into the picture and at least earn some profits?

In the investment world, people love to copy.  You have probably observed it in the media industry as well; when a show on one channel becomes immensely popular, other channels also launch similar versions of the shows. The same scenario holds true in the investment world. When one company becomes hot, investors try to invest in other similar companies that belong to the same sector. As an example, if Facebook is enjoying an upsurge, increasing investments will be made in other social media companies. What is the net effect of this? The share prices of all the companies rise. This effect can be observed with both public and private companies. If you can use this to an advantage, you can gain an edge.

Here are examples of two companies: A and B.

Company A: is aimed at connecting renters and landlords, and allows them to conduct short term rental deals with each other. Right now, this company is enjoying growth and its revenue figures are getting better than ever before. The company is performing beyond expectations, and is indeed worthy of an investment.

Company B: This organization is number one when it comes to online rentals, but is still a private company. Unfortunately you cannot invest. The good news is that this company plans to hold an IPO that valuates over to billions of dollars in the next few months.

Obviously, the IPO is hot news in the market. Investors cannot utilize it to their benefit, so they turn to other public companies and invest in them. In the light of the above example, this will be company A. Indeed, company B is better because of the upcoming IPO, stocks of company A also rise.

There are not any guarantees, but there is still a good chance that any investors can profit from such a situation. Keep your eyes open and good luck with your investments.

Source: www.dailyfinance.com

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