Expert: Paul Henneman - 6/25/2007

Question
Hi,
My Question is simple yet very broad.To know you about me I am someone who wants to invest in small amount initially and latter grow so want to know what is IPO and how am I be going to be profitable ? How will i get the ROI ?

Answer
Thank you for your question!
IPO stands for 'Initial Public Offering'. This is basically a company that is going public for the first time, so the stock has not traded in the past.
However, making money on an IPO is not necessarily very easy. The problem is that current investors in the company before it goes public, venture capital firms, and the sponsoring institutions have the ability to get the stock before it is publicly traded on the markets. These people usually make quite a bit of money on the IPO. But for regular investors, you must wait until the stock can be traded by a regular trading service, then buy it. All other investors around the world will also be aware of the IPO. You must act very quickly.
And it is still highly advisable to research the company that is offering the IPO as well. It is very possible that the stock price drops from the initial level it is offered at, and you could lose some money at first.
I suggest looking at an IPO like any other stocks. If the company is a good one, growing quickly, and has the potential to generate strong profits, then investing in the IPO could be profitable. Google is an example, investors that bought Google when it first went public typically made alot of profits. However, not all IPO's are good ones, so research is still the key to success.  Blackstone just had an IPO, and on the second day of trading the shares have dropped in value so far.
Here are some links that may be of interest and help you learn more about IPO's:
http://en.wikipedia.org/wiki/Initial_public_offering

http://biz.yahoo.com/reports/ipo.html

http://www.ipohome.com/default.asp

http://moneycentral.msn.com/investor/market/ipomain.asp

I hope this helps! Please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com