Original title: Financial experts: need to be cautious about Airbnb and other IPOs and not be swallowed by fanatics
Even in the new crown epidemic, many popular companies have already gone public, providing investors with opportunities to buy stocks. But joining the “carnival” as early as possible is not the best strategy.
This week, two blockbuster companies conducted initial public offerings (IPOs) and performed strongly on the first day of trading. Food delivery platform DoorDash rose 85% on the first day of listing, while short-term rental booking platform Airbnb soared 112%.
According to data from Renaissance Capital, so far this year, a total of 203 IPOs have raised $74.9 billion, many of which have performed well. As of Thursday’s close, the Renaissance US IPO index has so far risen by more than 113%.
Financial experts said that despite the good performance of the IPO, investors should still proceed with caution. In recent months, U.S. stocks have been turbulent, and not every newly listed company can continue to rise after an IPO.
Anjali Jariwala, founder of Fit Advisors, said: “People should be cautious about IPOs because they are often overvalued before going public. Just like any investment, you should be careful not to be swallowed up by media fanaticism.”
An IPO is a way for private companies to raise funds by selling shares to the public. Before issuing new shares, the investment bank, which is usually underwritten by the IPO, sells the shares.
Usually, those pre-IPO stocks are reserved for experienced investors or institutions to conduct such transactions, and these buyers may need to keep the stocks for a certain period of time (usually six months) before they can be sold.
Retail investors usually have to wait to start trading through markets such as the New York Stock Exchange or Nasdaq, which means that retail investors have already received less income than early investors.
If there is a demand for newly listed companies in the market, the stock price will rise suddenly after the market opens. This happened to Beyond Meat, an artificial meat producer, whose share price soared by more than 163% in the highly anticipated first day of IPO transactions in 2019.
On the other hand, if demand is insufficient or the market believes that the company’s valuation is too high, the stock price may fall. Ride-hailing giant Uber plunged more than 7% on the first day of its IPO last year.
If a stock falls on or after the first day of IPO, this does not mean that it will not rise again. Investors may need to wait patiently.
For example, Facebook, which currently has a stock price of more than US$275, went public at a price of US$38 in May 2012, but fell below US$18 in September of that year. It took another year for the stock price to return to its original issue price.
Source: Financial industry websiteReturn to Sohu to see more
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