Exciting New Trading Opportunities with IPOs

June 19, 2020

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Today, when you hear that a company is going IPO, they actually mean that as a private company, they are making an initial public offering on the stock exchange. They go from being a privately owned company to public ownership. Look: It is not easy to be listed on a major stock exchange. To qualify, companies have to have strong fundamentals and proven profitability to qualify for an IPO, it carries a considerable amount of prestige. Now, it is not to be taken lightly. It is a big process with many pros and cons but it does open many financial doors. Here are some of the pros and cons of an IPO: Pros:

The company gets exposure, prestige and increased awareness of public image which helps to increase their sales and profits.
The company gives a lower cost of capital.
Facilitates potential for return for shares of stock acquisitions as they can issue more stock in a secondary offering making mergers and acquisitions easier to arrange with stock issued as part of the deal.
Has a diverse group of investors to raise capital.
Attracts higher caliber management and skilled employees through liquid equity participation and other benefits like employee stock ownership plans.
Compared to other options, the company can raise large amounts of money.
Attracts ready buyers and sellers on the stock market.

Cons:

Due to new shareholders who get voting rights, they suffer losing control which can affect the company decisions.
The company is obligated to disclose business information, financial, accounting and tax.
Disclose information publicly that can be useful to their competitors.
Ongoing and significant legal, accounting and marketing costs.
More time required due to management for reporting.
In the event that they do not raise the required funding that the market does not accept the IPO price, they risk suffering the stock price going lower after the offering.

Getting started Once a company decides that it wants to go public, they have to hire an investment bank to underwrite the IPO which involves raising money either by debt or equity. They negotiate the amount of money the company will raise and the type of securities that they will issue. At the conclusion of the negotiation and after a deal has been agreed, then they need to file an initial draft offer document to the Australian Securities and Exchange Commission (ASIC) or the Securities and Exchange Commission (SEC) in the U.S.A. Public companies are overseen by similar governing bodies in other countries. In this document is all the relevant information for potential investors. Allocation of shares An allocation of shares is then offered to investors, customers and the general public which can be bought via your stockbroker. Then, the allocation of shares is granted after the applications are received. The final step – listing The shares are listed on the stock market. This is when you can trade the company’s shares which can increase or decrease depending on the markets. Some of the largest IPO’s so far are:

Facebook which raised $16.01 billion in 2012
Visa raised $19.7 billion in 2008
AIG -American Insurance Group raised $20.5 billion in 2006
General Motors (GM) raised $18.15 billion in 2010
Alibaba Group raised $25 billion in 2014

IPO season in full gear The most recent company to IPO is Lyft, ride hailing service on March 29 with a valuation of over $20 billion and on March 21 Levis, denim giant made its IPO on Wall Street. The good news for traders and investors is that both of these listed companies can be traded on Plus500’s platform. In the coming months, there are a number of listed companies who are expected to IPO. Here’s the list with the valuation:

SpaceX with $12 billion
Airbnb with $31 billion
Dropbox with $10 billion
Pinterest with $11 billion
BuzzFeed with $1.7 billion
In Europe, Spotify with $8.5 billion
Uber, is expected to make its debut on the NYSE in April 2019. (Plus500 traders will be able to Buy and Sell Uber shares shortly afterwards). Since they launched they have received funding worth $7.4 billion and are now worth $51 billion.
Pinterest is also set to list its shares in the upcoming month

Here’s what happened after Snap Inc., the tech giant, went public on the NYSE on 2 March. On the first day of trading, they were valued at $28 billion. Their share price rocketed from $17 to a closing price of $24.48 in its first day of trading! It is interesting to note that there are a number of large companies that are still private like IKEA, Hallmark Cards, Publix Supermarkets and Mars Candy.

How can you actually use this? Plus500 Forex/CFDs broker is listed on the London Stock Exchange and is currently a leader in the industry. They offer traders optimal trading conditions resulting in profitable and successful trades, in short they are a one-stop-shop.

IPO trading with Plus500

Bottom Line? Traders have the opportunity to trade over 2,000 assets on their powerful platform which are made up of: stocks, commodities, indices, currency pairs, ETFs and cryptocurrencies like Bitcoin, Bitcoin Cash, Ethereum, Litecoin and Ripple. In addition here are some of the perks that they offer:

Attractive spreads
Zero commissions
Fully regulated by the FCA, CySEC and ASIC
Excellent and professional support
Demo account with virtual money
Easy to use platform with advanced financial tools and graphs
Education program with live webinars, e-books and more
Live financial news feeds
Low minimum deposit of only $100

If you want the best online trading experience, then Plus500 is the best choice. Start trading with Plus500! 84% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money