An IPO is when a private company sells shares to the public for the first time. Traders watch for the pre-IPO hype pump, the post-lockup dump when insiders can finally sell, and the short-selling restrictions that create one-sided price moves.
Initial Public Offering, or IPO for short. This is when a private company decides to go public and sell its shares to the public for the first time. It helps the company raise more money, grow, and expand its operations. By becoming public, a company can raise funds more easily and actually reduce its financial burden. It also spreads out the company risk between all the shareholders and gives the company more options for future fundraising. Which is also called offering. While going public has its perks, it's also expensive and comes with responsibilities. The public company will now need to report its activities on a regular basis, seek approval from shareholders for certain decisions, and adhere to strict regulations. The process itself is complex and we're not going to expand on it because it's not that important. So we're not going to get into it today. But why should we care about an IPO? Well, this course is all about teaching you how to make money. So you can guess why we're here— the IPO pump. Oftentimes there will be a lot of hype around these fresh IPO plays because it's a new company coming into a new shell and a fresh new story around the block. I am going to say this is heavily dependent on the market sentiment and if the market is currently looking for IPOs. And generally it's considered a little bit more on the risky side, but If you're early enough and you know how to trade and invest in these IPOs, you can make a killing. And I mean a killing. Down below, you can find a website that's going to help you keep track on upcoming IPOs. Another thing we need to take into consideration besides the IPO pump is none other than the lockup dump. Following the IPO, there is a lockup period where stakeholders that held the stock before it became public cannot sell their stock. So what usually happens after the lockup period is done is we get a huge dump from the stakeholders because they also want to realize their gains. Sometimes they might even pump the stock price upwards in order to sell for a larger profit. So we as investors and traders can benefit from it because if we know a pump or a dump is going to occur, we can position ourselves beforehand and just enjoy the show. One last thing worth mentioning. Is sometimes one day or several days after the IPO, there will be no short selling in the stock, meaning the price is going to only be determined by buyers and sellers, and shorts are not going to play a part of the equation.
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