In the pre-IPO placement, a large number of shares are sold before it gets listed on the stock exchange. The private companies conduct a pre-IPO (Initial Public Offering) placement in which the interested buyers can buy the stocks. Unlisted shares trading markets involve huge risks. Institutional investors, hedge funds, and private equity firms are usually the buyers interested in buying large stakes in the firm.
From the perspective of a start-up or a company, pre-IPO placement is a way to raise capital for the businesses. To offset the risk, pre-IPO placement is facilitated and it also controls the prices; otherwise, it will hike up as soon as the shares open for public trading.
Buyers can get a favorable price for the expected IPOs. The companies do not want the private buyers to sell the stakes immediately if their stocks soar on the stock exchange. To mitigate this risk, companies have implemented a lock-in period rule for a year. It retains the customers for the long term and the companies get financial support from the large investors.
Upsides of pre-IPO investing:
- Buying the shares of private companies in the starting stage is a proven way to earn exponential returns in the investment. The greatest benefit is that you invest in a company that is on its way up that can shine anyway.
- Pre-IPO shares are available at a discounted price. The investors can negotiate the deal at favorable pricing. These shares are worthy enough to get you profitable returns.
- The investors get a chance to build long-term wealth. With the growth of the company, investors can leverage its performance.
Downsides of pre-IPO shares investment:
- Investing in a private company with trial and test can put you at huge risks. It might lead to your complete or partial capital washout.
- The chances of selling shares in the market are grim as it might be challenging for a business to find substantial buyers of the shares. Due to difficulty in trading unlisted shares, there can be a liquidity crunch in the market.
- A few companies aren’t capable of paying the dividends from the funds raised through the pre-IPO placements. They reinvest the funds in the company itself although the shareholders benefit from the growth of the company.
- To keep the business going and increasing, they may opt to accumulate funds at later stages by issuing shares to new shareholders. It leads to dilution of your stakes. So, the values held by the previous investors may fall in the future.
If you succeed in buying the shares of the potential company at the right time, you can make enormous profits. The prediction of the potential ideas of start-ups or businesses is unpredictable. Unlisted Assets provides you the opportunity to invest in the best pre IPO share price for you to earn assured returns on investment. The savvy investors show more interest in investing in pre-IPO shares more than the listed equity shares. They acquaint you with the process of investing and the status of the companies.