How to Take Advantage of a Company Going Public

The stock market.

When a company first offers its stock to the public, it is taking a serious risk. Private companies do not have to worry about public perceptions; public companies do have to worry about the financial press hurting their share price. As an investor, you can make money during this movement from private to public, but you need to properly research the company to know you are making the right decision.

Things You'll Need

• Computer
• Internet
• Telephone Line
• Stock Brokerage Account

Instructions

Research

1. 

   A man researching stocks.

   In order to take advantage of a company going public, you must thoroughly research the company and its position in the market. While many companies go public after establishing themselves in the marketplace, others simply go public to raise money. You definitely do not want to purchase stock from a company that is not going to do well. Each year, many companies go public that do not succeed.

2. After you have researched the company that is going public, consult a stock broker to see if he has any ideas about the stock. Ask him what people are saying on Wall Street and in the financial press. If people are talking about the company, the stock is probably going to rise in price after the initial floor offering. If people are not talking about the stock, it is probably going to fall in price.

3. Go to the company's website and learn when it will be making its initial public offering, commonly referred to as an "IPO." Buy the stock as soon as the stock is available on the market floor if you believe it will do well. If you do not believe it will do well, research other companies that are in the process of going public and begin the process.

Tips & Warnings

• Be sure to research the economy and the market of the company you are considering purchasing. Each year, many companies fail in their initial public offering because of factors outside of the company's control, such as the economy.

• Day trading is not for everybody. Many successful investors do not trade on a daily basis and hold their stocks for a very long period of time. There are serious financial risks to purchasing the stock of a company that is going public for the first time.

References

• "Understanding Wall Street"; Jeffrey B. Little and Lucien Rhodes, 2010