Fear of Missing Out — better known as FOMO these days — is a strong human emotion, to begin with, and when money is involved, its already considerable influence becomes even more powerful. You can make a pretty strong case that nothing taps into this alchemy of money-fueled emotion quite like IPOs do. In the financial and mainstream media alike, it seems that we’re constantly regaled with stories of people “on the inside” who have amassed fortunes simply by “getting in on the ground floor” of an IPO opportunity that’s enjoyed a meteoric rise — think Google, Amazon, Facebook, Tesla, and many others. This may have caused you to feel left out, wondering, “Why can’t this happen to me?”
In reality, IPOs are very far from the “can’t miss” wealth vehicles they’re often made out to be. For every winner the media can point to, there are also quite a number of IPOs that not only fall rapidly from their initial IPO valuations, but also never recover. In fact, plenty of them fail outright. Further, the idea that the general public can somehow buy into an IPO at its initial offering price is just a fable. Those who actually get a crack at the initial IPO offering are the most prominent clients – typically large financial institutions – of the investment banks entrusted with handling IPOs like Goldman Sachs. While the Average Joe on the other hand, only gets dibs once they’re actively trading, at which point hordes of investors are often feverishly trying to add them to their own portfolios.
Where FOMO is concerned, giving in to emotion is often a prescription for financial loss for investing outsiders. In most cases, the price per share of IPOs drops below their initial offering price within the first six months — often substantially. And yet it’s hard to get those IPO success stories out of our heads. We’d sure hate to regret our lack of action if the company in question becomes a successful household name without us being on board. Surely there must be a roadmap to IPO success, right?
If you’re wondering this very thing, we’ve got you covered. Listen in to the newest episode of A Place of Possibility™, as Richard and Angela offer you an honest, clear-eyed view of these captivating and largely misunderstood investments. They’ll clear up some of the misconceptions that surround IPOs and explain why they’re rarely — if ever — the financial panacea they’re often portrayed to be.
We’ll be talking about:
- The motivations that lead a company to offer its stock to the public in the first place
- Why our current economic conditions make the IPO route even more attractive for companies seeking additional capital
- Who actually sets the initial share price of an IPO, and why a true (Dutch) auction — where actual buyers of the stock set the price — isn’t even considered an option anymore
- The forces that conspire to make things difficult for independent investors seeking to mirror the IPO moves of well-connected financial institutions
And more!We look forward to giving you an honest, unbiased perspective on IPOs to help you become a more prudent and well-informed investor. We hope you’ll pass this episode along to your family, friends, and anyone else who you think might benefit from it.
P.S. Looking to meet with Richard or Angela at our office in Alamo, CA? Want to discuss more of what you heard in this episode? Wondering where the heck you need to get started or what all of this means for your retirement plans? Schedule a free 30-minute session and find the peace of mind you deserve for the rest of your life. You can also reach us by calling 925.736.6410 or sending an email to Info@APlaceOfPossibility.com.
“So you think you’re getting an IPO, but the only people that get the IPO price are the ones that are the clients of the investment banking company. So that would be like, your big institutions or your pension comp, pension plans and things like that. Not Average Joe or Joette. We have to end up buying it after the IPO is done, and it starts trading on the stock exchange, and you typically don’t get a good price.”
We’re proud to present you with our “Know Your Possibilities Guide,” a tool and free resource for you to take notes, review, keep on hand, or even share with your friends and family. So, grab your copy, click the play button and follow along. You’re just minutes away from discovering your next Place of Possibility.
A Glance at this Episode:
0:00 Introduction
1:56 Let’s kick off the show by discussing what makes IPOs so alluring.
2:23 By contrast, these examples prove how difficult the IPO landscape is to navigate.
3:11 Before we dive in too deep, let’s hammer out some of the basics. If you’re not sure exactly what an IPO is? Tune in here.
3:32 Wondering why a company wouldn’t just borrow the capital it’s seeking? Here are some of the reasons.
6:06 Assuming a company wants to go public, they usually hook up with investment bankers to get the job done. These are some functions an investment banking firm will perform on behalf of an IPO-bound company.
7:38 Did you know that institutional investors and true financial insiders are the only people that get the first crack at an IPO? Which begs the question of when an individual investor or the Average Joe get into the mix. HINT: It’s a scenario that’s not nearly as appealing.
8:33 Fueled by FOMO, this is what an IPO often resembles on its first day of trading. It’s also why it rarely works out well for the individual investor.
9:56 This rule prevents company insiders from riding an IPO’s initial frenzy and then dumping it for a quick profit.
10:43 Wondering how IPOs are doing as compared to the stock indexes on the whole? Here are some sobering statistics.
11:26 IPOs are sexy and fun, but prudent investing is dull, and that’s where people need to be.
12:44 It may not seem flashy, but this is when to consider buying an IPO that becomes actively traded.
13:35 On to one of the top questions we get… If the public is excited about an IPO, I should invest, right? WRONG! This is one of the worst possible ways to gauge an IPO’s value. Here’s why…
16:26 Another big myth is that IPO investments will yield higher rewards than waiting to invest. Here’s why you should proceed with caution when considering investing in any new company.
17:46 This bygone era is fuel for nostalgia that can still prompt unwise investments. History is proving our point over and over again!
18:40 Even though IPOs do have audited financials, here’s why that’s not enough to ensure long-term stability.
20:33 Despite what you might have heard, individual investors don’t get the opportunity to invest in actual IPOs. This is the primary reason why.
22:39 Here’s Richard and Angela’s best piece of advice for any investor still wanting to buy an IPO after it has hit the market.
24:47 This investing perspective can help you avoid overpaying for a stock just because it’s in the public consciousness.
26:35 It may not seem to be an exciting approach, but this is the type of investor who usually makes money over the long haul.
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Links/Resources Mentioned in this Episode:
- Ensure your family’s wealth will live on for generations to come. Order your copy of Endless Inheritance by Richard Del Monte today! https://aplaceofpossibility.com/endlessinheritance
- If you’d like to know more about DMG’s approach to investing, we encourage you to download a copy of The Investment Answer, which we now have available as an eBook. It’s a very easy read — you can probably get through the entire eBook in just one evening — but it has the potential to revolutionize your relationship to investing and help you avoid many, if not all of the mistakes you may be making without even knowing it. To get your copy, go to https://APlaceofPossibility.com/DMGInvestmentAnswerEbook.
- Del Monte Group offers a variety of free resources to help you make innovative and educated financial decisions so that you can keep, grow, and enjoy your wealth starting now. Find them by visiting https://aplaceofpossibility.com/resources
“One-size-fits-all” won’t fit you here! The Del Monte Group team understands that everyone’s financial goals are unique. That’s why we always provide customized advice. No matter where you are in life, you can depend on our proven expertise to provide financial planning support for long-term success. Ready to get started? Schedule a meeting with Richard or Angela in our Alamo, CA based office today or we can meet via Zoom! >> You can select a date and time that works for you via our calendar, call us at 925.736.6410, or send an email to Info@APlaceOfPossibility.com. We can’t wait to help you!
