IPOs Are Coming Baaack
🚀 What’s happening: Initial Public Offerings, or IPOs for short, are when a private company offers ownership of their company (stock) to the public for the first time.
Historically, this has been the main reason for Wall Street to exist in the first place. Before it got so complex and focused mainly on making money for Wall Street institutions themselves, the main purpose of the stock market was to raise money allowing companies to continue to grow.
Over the past two years we have seen a historic lack of IPOs mainly due to market volatility and lack of certainty about the overall direction of the economy.
This is all about to be tested as British chip designer Arm is about to go public on September 13th with the biggest IPO since 2021. They are seeking to raise about $5 billion at a roughly $50 billion valuation.
This IPO will be widely watched and we would expect you will see lots of headlines about it over the next few days.
👪 Closer to home: Watching this IPO will be a good cheat sheet for anyone looking to get a “temperature check” on the market and what may be coming next.
If the IPO is well received and the stock does well, this can lead investors to conclude that there is some stability in the market and it may pave the way for a rally into year end.
In addition, if Arm can perform well, it may also bode well for other companies you own in your portfolio that are exposed to AI.
Should you want to get involved in this one or another one, there are a few ways you can make money with an IPO. They are:
Invest directly in an IPO. If you want to actually try to invest in an IPO (go slow!), here are some steps you can take.
Invest in (or beware of) similar companies. Look at the stocks you own in your portfolio. If you think the IPO will do well chances are it will also help the stock price of similar companies as people get excited. The reverse is also true.
Watch what comes next. With an important IPO like this, how it goes may have implications for the broader stock market. As noted if you see it go well and hear that more companies will start to go public, this typically is a good sign for the broader market to go up in the near term.
If you want to go slow and learn more about IPOs or investments in general, here are some tips:
IPO history. A great way to start with IPOs is to track how companies that have went public in the past have fared. Here is a list of the top 20 over the last 10 years to get you started (track them with your kids!)
Other investing options. If you don’t want to take the risk of the stock market right now we don’t blame you. That’s why we recently came up with low risk ways to earn 5% or more on your cash.
