To invest in buying Pre IPO shares you require extreme precision, knowledge of the market and a proper understanding of the company. Apart from this, you also need trustworthy brokers so an analysis of the factors before investing in any IPO share can be a daunting affair. To make things easier for you, we have listed five ways through which you select the perfect IPO shares for investment. Read along to know those five mantras!
1. Research is the first step!
Whenever investing to pre IPO shares, we highly encourage you to search the internet for information on the particular company, its reviews, ratings, past customer delivery experiences as well as its overall industrial health. Your research may lead you to certain dealings of the company which make it unfit for you. So do research well in order to shortlist the best Pre IPO shares in India.
2. Have you read the company's prospectus?
Though it is a long and often monotonous task but reading the company’s prospectus is crucial to understand its structure, vision, services and other technicalities that are otherwise not openly discussed. Just skimming through it isn’t enough, rather a detailed study is what we recommend. Though it can turn out to be a dry read but better safe than sorry, isn’t it? The prospectus will put before you the company’s risks, opportunities and future plans, all of these points will enable you to thoroughly comprehend an organization’s nuances before you buy pre IPO shares.
3. Select a reputable broker
When you buy Unlisted Shares, try selecting companies that have a reliable, well-established and strong underwriter. It’s quite understandable that quality brokerages will bring quality companies public. Therefore, do take care when selecting brokers. We don’t suggest that you stop yourself from choosing smaller brokerages, however the wiser step would be to go for big ones. Small brokers may allow you buy pre IPO shares readily but that the scheme can be dubious as well. Just exercise caution is all!
4. You might want to wait for the Lock-up period to end
A lock-up period (3-24 months) is essentially a contract between insiders of the company and the underwriters that prohibits them from selling any stock shares for a particular pre-specified period. The strategy of waiting until the insiders are ready to sell their shares as that indicates that the company has a sustainable, profitable and bright future. If they’ve held on to the stock throughout the lock-up period, then there would be a fitting reason behind it, isn’t it?
5. Keep an eye on the Valuation
For investors, valuation is one of the toughest things to conclude as the process is extensively technical. Before arriving on a final offer, the underwriter and investment bankers judge the quality of management and returns, this entire task is tedious and takes time too. A good idea would be to compare the valuation of the IPO in India with a listed peer in the secondary market.
We are positive that if you carefully abide by the above mentioned tips, you will surely invest in highly rewarding and fruitful shares. The right IPO share can change many things for you at personal and professional fronts so do ensure to pick the best pre IPO shares in India!