Initial Public Offerings can be very exciting.  Almost everyday, companies start trading on Wall Street and begin trading as a public company.  Investing into them can be an extra risky thing.

How to evaluate companies pre-IPO

As part of the IPO filing, they have to report their earning history to the SEC.  This is just a relatively short history of their finances.  They could be hiding financial woes, bad years, or something worse, a bad plan for the future.  Some companies file for their IPO too soon.  They aren’t a stable company yet and haven’t proved their worth.  They are typically push into IPO because the founders or private investors want to cash out of the company.  They usually can’t do this until 6 months after the company starts trading, but the motivation is there.

Besides their financial worries, they might have a business model that might just be a viral thing and sales might decline in the near future faster than anyone would like.  Some examples of these would be like Groupon and LivingSocial.  They both seem to appear in the spot light quickly, but now has faded just as fast.

A good resource and commentary for companies that are about to have their IPO, is the place to go.  They have many independent writers that lay down the facts of these companies and adds their commentary.  We can all learn a lot from their analysis.

Here are some recent and upcoming IPOs:

  • Box Inc.(BOX), a cloud platform provider, IPO opened at $14, currently $19.75.
  • Shake Shack (SHAK), a burger joint, IPO opened at $21, currently $50.05.
  • GoDaddy (GDDY), a web domain marketplace, IPO to be opened at $20.
  • PartyCity (PRTY), a party supplies retailer, IPO opened at $20.45, currently $20.72.
  • Etsy (ETSY), an online craft marketplace, IPO opened at $33.24, currently $29.90.

Looking at the sample size of two other IPOs, they have both improved.  Will GoDaddy be an IPO winner or wiener?

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