What if we asked you this question: "Would you want to miss the next Amazon or Apple"?
Surely your answer would be no. If that's the case, then you should look into IPOs. IPO stocks are different from other types of stocks since they allow a regular person (same as you or me) to be a part of a rising company that might turn out to be the next big thing.
IPO stocks can be very rewarding, and it's not rare to see that their price doubles days after the initial release. There are many examples for this, and on this list, you can check 25 IPOs that skyrocketed on the first trading day.
You might think that you're too late to the game and that the train has passed. You might think that there isn't a chance that you'll catch another unicorn company that will bring millions to the first stockholders. But, this isn't true.
New companies that have a lot of potential announce their IPOs every week, the latest example being Zomato, a company that in July 2021 gathered over $1 billion in stock evaluation, even before letting the public participate in the stock listing.
There are many examples such as Zomato, but even though you may think that you, as an average Joe, can't be first in the line to invest in the IPO, you are wrong - you just need to know where to look.
And yes, it goes without saying that investing in IPOs, especially in the crypto space, is a huge gamble - but on the other hand, if your investment in an IPO turns out to be a good one, you might win a jackpot.
In this article, we'll talk about IPOs - especially in cryptocurrency. We'll see why IPOs are a potentially good choice for investors, how you find their listings and what you should be aware of before you invest.
Hold On, What Is An IPO Stock?
We mentioned IPO stocks several times, but to really grasp how they fit in the crypto world, we first need to explain what they are.
The three letters in the word of IPO stand for a term each (IPO - Initial Public Offering). Now it might be more clear to you what IPO means and what it stands for. But let's dive a bit more into the subject.
IPO stock (or initial public offering stock) is a type of stock where a particular company offers its shares to the public for the first time in their business.
Let's look at it through an example - let's say that you are an owner of a company. You own a small company that has potential. You might work in the crypto space or some other industry; it really doesn't matter. Since your company has potential, you want to gather funds to improve and make your business bigger.
But you don't have the funds, right? After all, you're a small company. Because of this, you offer your shares to the public. An average Joe can invest and buy your stocks, and in return, you get the money that you can later use to grow your business.
And everyone is happy - Joe because he invested in a potentially profitable company, and you, as a company owner, can use that money to improve the way you work and become more profitable.
A perfect example of this is the recent IPO offering of the famous Indonesian company Bukalapak. The company gathered over $1.5 billion from the initial public offering, more than enough to make their business bigger and stronger.
Let's also explain the difference between public and private companies. Private companies are not listed on any big exchanges (London one, for example), and such companies don't let the public buy their stocks.
In contrast, a public company gives the general public ability to buy their stock (one of the ways to do this is through IPO), and they are listed on significant stock exchanges.
If you want to learn more about stock market in general and how Wall Street works (kind of), we suggest that you take a look at Netflix's wonderful mini-documentary about it.
IPOs Are Very Popular, But Why?
Even though you might think that IPOs aren't very popular (probably because you never heard of them), they actually are. IPOs are appealing to most investors because of the enormous profit they potentially carry. This is even more amplified in the crypto space.
When the company becomes public, through an initial public offering, the stocks are distributed to the investors, and from this point, the price of the stock, in most cases, can go only up.
This is appealing to investors because they can invest in a company before anyone else and have a head start over the competition. This also means that the investor will buy the stock at the lowest price ever (since during the IPO, the stock price is at its lowest).
Buying the stock at the lowest price is a good thing. From that point onwards, if the price grows, you will make a profit, and it's not unheard of that first IPO investors make 100 times more money than they initially invested.
Can I Buy IPO Stock?
The million-dollar question is: "Can I buy IPO stock?" You are surely wondering this and want to get your piece of the pie after you've learned how financially beneficial initial public offering stocks can be.
You may think that the process of buying IPO stocks is extremely complicated, but it's not. It goes without saying that you first need to learn the basics of trading and how crypto space works, but when you get the hang of it, buying initial public offering stocks will be a piece of cake.
Let's get back to the million-dollar question. The short answer to it is - yes, you can buy IPO stocks. The reality is a bit different, and you need to have some prerequisites before you can get your hands on those precious shares that might multiply several times in the next few years.
First of all, you can't just walk from the street and buy an IPOs. You first need to have a brokerage account on one of the big platforms that have the license to trade initial public offering stocks.
Another, more traditional way to buy IPOs is to give a broker permission to do it on your behalf. Many people don't know how to trade and don't have a brokerage account. When that's the case, the best thing you can do is let a licensed professional do it for you - you only need to give them the money.
IPOs in Crypto
Indeed, Initial public offerings were primarily present in the traditional stock market. But, ever since the crypto space has taken over the world by storm, IPOs are now present for crypto projects as well. And most of them can turn out to be highly profitable.
Let's start with the one cryptocurrency everyone is familiar with - Bitcoin. Although Bitcoin itself didn't have an IPO the way we know it nowadays, it did have early bird investors that caught it when it was at its lowest ($0.0008!)
Imagine how wealthy those who bought Bitcoin at that price are, knowing that it's trending now at $62.000 at the moment of writing this article. Indeed those people are now millionaires if they resisted the urge to sell it earlier.
Apart from Bitcoin, there are a ton of different cryptocurrencies that offered their IPO and are now trending. Solana and Ripple are just a few, but there are a bunch more on the market.
Initial public offerings for cryptocurrencies are extremely common, and with over 100 cryptocurrencies seeing the face of the day, every single day, it's easy to calculate that IPOs have a big role in the crypto space.
But, before you nosedive and go on an IPO investing frenzy, you need to know a few things regarding crypto and initial public offerings. As with everything, there are two sides of the coin, and even though IPOs have many positives, they also have several negative aspects.
We said that IPOs are standard in crypto, but what's even more common are the so-called "rug-pulls." What are they exactly?
When someone makes a cryptocurrency through an IPO, a handful of people will get the initial number of coins and wait for the cryptocurrency to see the light of the day. When the currency becomes available to the public, usually at a higher price, the initial investors will do a "rug-pull," or in other words, sell the initial coins that they own for a higher price that is available to the general public.
This way, the IPO buyers won't make a fortune - in most cases, they will sell the currency for a price that is 30% bigger than the one for which they bought it -but hey, a profit is a profit, especially if you invested a lot.
This action will result in a rapid loss in the value of that coin, and in a matter of a few days, the price will plummet, and the currency will become worthless.
Guys who bought the coin at IPO are happy, but investors who bought the coin at the moment of listing aren't as the coin price dropped drastically thanks to the big players that sold what they had at the moment of listing.
This kind of behavior is extremely forbidden on the traditional stock market, and specific protocols are in place that block such "rug-pulls" from happening. But in the crypto space, where everything is decentralized and isn't controlled by anyone, these types of scams are widespread.
This is why you need to be extremely careful when you buy crypto IPOs and should always double-check the source of the coin, the project behind it, and whether the project owners identified themselves or not.
Oh, and we'll give you a small tip. Currently, NFTs are trending, and new projects are popping every single day. Most of them are genuine, and if you are fast, you can grab that golden coin before listing at the initial public offering.
The most important thing regarding IPOs is that you are aware of its pro's and con's. With that in mind, you should be able to make a good investment choice, together with analyzing the project that is appealing to you.
IPOs Can Bring You Fortune
Initial public offerings are something you should be aware of, especially if you are a crypto trader. Simply put, if you are first to the game, with a good project and a good project team behind it, you can expect that your investment returns to you several times higher.
You wouldn't want to miss the next Bitcoin or Ethereum, right? Besides, who knows, your initial investment might turn out to be a unicorn, and you'll end up being a millionaire! If that's the case, then IPOs should definitely be on your radar, and you should keep a small amount of your portfolio in such projects.