Should an investor participate in an IPO

Initial public offering (IPO) is one of the key growth points in the global stock markets. Companies actively use IPOs to attract capital, making this instrument popular among investors. In 2025, the market is showing growth, especially in the biotechnology and sustainable energy sectors. Should you participate in an IPO? The decision depends on many factors, including the investor’s risk readiness and the need for a thorough analysis of the company going public.

What is an IPO and How Does It Work

An IPO is a process in which a company offers its shares to a wide range of investors for the first time. The main goal of the offering is to attract additional funds to finance business growth, develop new products, or enter international markets.

Stages of an Initial Public Offering:

1. Company Preparation. Management, together with investment banks, develops a placement plan. This stage includes setting goals, structuring shares, and determining the preliminary value. For example, in 2022, Rivian, a company specializing in electric vehicles, conducted an IPO to raise over $12 billion.
2. Underwriting. Investment banks assess the business value, establish placement conditions, and distribute securities among institutional and private investors. Goldman Sachs and Morgan Stanley often act as lead underwriters for major IPOs.
3. Public Offering. After the share price is approved, they become available for trading on the stock exchange. In 2021, Coinbase went public on NASDAQ with a valuation of over $85 billion, making it one of the most prominent Initial Public Offerings of the year.

Advantages of IPOs for Companies and Investors: Is It Worth Participating

Initial Public Offering provides businesses with the opportunity to attract significant financial resources. The capital raised from share placements is used to finance key development areas, including launching new products, expanding production capacities, and strengthening positions in international markets. For example, Beyond Meat, a pioneer in plant-based meat, used funds raised through its IPO to expand its product range and enter new markets, ensuring steady revenue growth.

For investors, participating in IPOs provides access to promising companies capable of delivering high returns. Historical data shows that such investments can be incredibly profitable. For instance, Tesla’s shares grew by 20,000% after its Initial Public Offering in 2010, making the company a symbol of success in the technology and renewable energy sector.

Another advantage for investors is the opportunity to acquire securities before they appear on public markets. In the first weeks after the offering, share prices often rise, making IPOs an attractive instrument for those willing to take short-term risks for high returns.

Risks of IPOs: Should Investors Participate

Initial public offerings are associated with a high degree of risk, especially for newcomers. One of the main challenges is volatility. After an IPO, shares often show significant price fluctuations. For example, in 2021, Robinhood’s shares dropped by 8% on the first day of trading due to investors’ skepticism about the company’s business model.

Another danger is business overvaluation. Before an Initial Public Offering, companies create excessive hype, exaggerating their prospects. WeWork planned to go public with a $47 billion valuation, but after detailed analysis, investors identified serious financial structure issues in the organization. As a result, the offering was postponed, and the rating was downgraded.

For novice participants, lack of experience can be a critical issue. Without analyzing financial indicators and understanding market dynamics, participating in an IPO becomes a high-stakes game. It is recommended to carefully study issuance prospectuses, financial reports, and companies’ competitive advantages before investing.

Examples of Unsuccessful IPOs

Not every Initial Public Offering ends successfully. In 2019, Uber, one of the largest technology companies, faced a 7.6% drop in share prices on the first day of trading. The main reason was high operational losses and capital owners’ doubts about the business’s ability to achieve profitability.

In 2021, Deliveroo, a British food delivery platform, also faced difficulties. Its shares fell by 30% due to concerns about the business’s low margins and high competition levels.

Examples of Successful IPOs: Should Investors Participate and Why – Yes?

Despite the risks, many companies have proven that Initial Public Offerings can be extremely successful. For example, in 2014, Alibaba, the largest Chinese e-commerce platform, raised $25 billion, becoming the largest IPO in history at that time. The platform’s shares rose by 38% on the first day of trading, providing investors with substantial profits.

Zoom Video Communications also showed outstanding results. In 2019, its securities rose by 70% on the day of issuance due to the platform’s high popularity for video communication. By 2020, the shares had more than tripled, solidifying Zoom as one of the most profitable investments in the technology sector.

How to Participate in IPOs: Step-by-Step Guide

Should an investor participate in IPOs? The answer depends, in part, on the level of preparation:

1. The first step is to choose a broker providing access to Initial Public Offerings. Some platforms restrict access to private investors, so it is essential to select a mediator with minimal barriers to participation.
2. The second step is to study the companies going public. Participants analyze the issuance prospectus, which includes financial reports, placement goals, and growth forecasts. For example, technology firms with high innovation levels and stable profits may be the best candidates for investment.
3. To minimize risks, it is important to determine the size of investments. Experts recommend investing no more than 10% of a portfolio in shares of a single company to avoid significant losses in case of an unsuccessful placement.

Potential Profit and Examples from 2025

In 2025, the technology and biotechnology sectors remain leaders in the number of potentially successful Initial Public Offerings. Companies involved in artificial intelligence development and alternative energy attract attention due to their high growth rates.

Additionally, a solar battery startup may conduct an IPO with a valuation of $3 billion. The funds will be directed towards developing innovative energy storage technologies, ensuring the business’s market leadership. For investors, such placements represent an opportunity to gain significant profits in a short period.

Should Investors Participate in IPOs: Conclusions

Participating in Initial Public Offerings provides investors with opportunities for high returns. To achieve success, detailed analysis of the company, its potential, and market conditions is required.

The decision to participate or not depends on the investor’s level of preparation, their goals, and their readiness for risks. Novices are advised to choose companies with transparent business models and stable financial conditions. Experienced investors can use IPOs to diversify their portfolios and gain short-term profits.