What are Initial Public Offerings (IPOs), and how can Gold Coast Professional Services help your company take of advantage of the IPO phenomenon?

The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded. In an IPO, the issuer usually obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common preferred or debt security), best offering price and time to bring it to market.

Keep in mind, there is still money to be made in IPOs, but the focus has shifted from the quick buck to the long-term outlook. Rather than trying to capitalize on a stock's initial bounce, investors are more inclined to scrutinize carefully long-term prospects. And that’s how you should consider the life of your business – in the long-term. IPOs have many unique risks that make them different from the average stock which has been trading for a while. At Gold Coast Professional Services we’re not going to pull any punches with you. Just a few of things you should expect us to discuss:

We’ll research the market for you. Let’s face it getting information on companies set to go public is tough. Unlike most publicly traded companies, private companies do not have swarms of analysts covering them, attempting to uncover possible cracks in their corporate armor. Remember that although most companies try to fully disclose all information in their prospectus, it is still written by them and not by an unbiased third party

We’ll connect you with strong brokers.  Try to select a company that has a strong underwriter, because quality brokerages bring quality companies public. One positive of smaller brokers is that, because of their smaller client base, they make it easier for the individual investor to purchase pre-IPO shares. Be aware that most large brokerage firms will not allow your first investment to be an IPO. The only individual investors who get in on IPOs are long-standing, established customers.

You’re not going to sign anything we haven’t explained to you. Rule number one: never skip reading the prospectus. It may be a dry read, but the prospectus lays out the company's risks and opportunities, along with the proposed uses for the money raised by the IPO. Most companies have learned that over-promising and under-delivering are mistakes often made by those vying for marketplace success.

We’ll tell you when there are turns ahead. Skepticism is a positive attribute to cultivate in the IPO market. There is always a lot of uncertainty surrounding IPOs, because like any investment strategy there in no “sure thing”. With Gold Coast Professional Services you’re in good company, because we always approach an IPO with caution.

The realities of the “lock-up” period. The “lock-up” period is a legally binding contract (three to 24 months) between the underwriters and insiders of the company prohibiting them from selling any shares of stock for a specified period of time. When lock-ups expire, the previously restricted parties are permitted to sell their stock.

Gold Coast Professional Services is by no means suggesting that all IPOs should be avoided: some investors who have bought stock at the IPO price have been rewarded handsomely by the companies in question. Every month successful companies go public, and if yours is out on the market we want to ensure that it has the potential to succeed.

Remember, a skeptical and informed investor is likely to perform much better than one who is not.