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IPO Archives

What is an IPO?

An IPO, or initial public offering, generates a lot of investor excitement. But these stocks could be more hype than help to most portfolios.

When a privately-owned company is listed on a stock exchange and makes shares available to the public, it’s known as an IPO. To make an “initial public offering,” a company needs to meet the requirements of and file with the Securities and Exchange Commission (SEC).

The requirements for approval are extensive, and include creating a prospectus, which describes business operations, financial status, financial statements, and potential risks to investors. The SEC also examines accounting practices to ensure compliance with federal laws.

Once the SEC approves a registration, the company can list and sell shares on an exchange, like the Nasdaq or NYSE. Each exchange, however, has additional protocols for listing. In other words, going public is a lot of work for a company.

Here’s the critical part, though. A company doesn’t go public because management wants to expand the investor base to include you and me. An IPO is usually a liquidity event that allows early investors to cash out part, or all, of their investment. Or, it’s a capital raising event that will raise money to keep the business running (not the ideal scenario for new investors) or fund growth initiatives (much more compelling, in my opinion).

What does this mean for individual investors? First of all, buying IPOs isn’t that easy. That’s because brokerage firms generally reserve most shares for large institutions and the underwriting firms’ well-heeled clientele.

You may not want to buy an IPO anyway. After the IPO (initial public offering) event, there is often a period we refer to as the post-IPO blues. This is when the excitement of the IPO roadshow and big event has passed, and a stock settles down into real life as a public company. In general, this happens at some point in the first four months of trading, and after the initial IPO surge (which usually occurs on day one). The stock then trends down, often landing well below its IPO price.

This pattern happens over and over because it takes several quarters for everyone to understand the ebbs and flows of revenue and earnings, get comfortable with the company’s business model, and cozy up to management’s communication style. There is a relationship to build between a stock and its public investors. And that takes time.

For stocks that you don’t need to worry so much about, download our FREE report, 10 Forever Stocks to Buy Now—and How to Find the Best Growth Stocks, today.

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Cabot Turnaround Letter Weekly Update

April 16, 2021|From Cabot Turnaround Letter|by Bruce Kaser|Value Investing

Today’s note includes earnings updates and the podcast.
Read More

Cabot Prime Pro Week Ending April 16, 2021

From the Cabot Prime Pro Week Ending April 16, 2021 issue of Cabot Prime Pro|by Cabot Wealth Network|Cabot Prime Pro

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
Read More

Cabot Prime Week Ending April 16, 2021

From the Cabot Prime Week Ending April 16, 2021 issue of Cabot Prime|by Cabot Wealth Network|Cabot Prime

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
Read More

VIDEO: Three Compelling Software Buys | Cabot Weekly Review

From the issue of |by Tyler Laundon|Stock Market |

IIn today's Weekly Video small cap analyst Tyler Laundon illustrates how the broad market has put together another encouraging week and he digs into a few ETFs that show pocket of particular strength.
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Cabot Top Ten Trader Movers and Shakers Weekly Update   

April 16, 2021|From Cabot Top Ten Trader|by Mike Cintolo|Growth Stocks

This remains an “on the one hand, on the other hand” type of market. On the one hand, we continue to see more and more setups among growth stocks along with a lack of major selling, and starting on Wednesday, even some of stalled-out...
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Cabot Early Opportunities Special Bulletin

April 15, 2021|From Cabot Early Opportunities|by Tyler Laundon|Small Cap Stocks

We’ve seen a big improvement in the way many growth and early-stage stocks are acting over the last two weeks. Many of our stocks that sold off in March have been gaining some altitude back, and many of those that were acting well to...
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Cabot Explorer 733

From the Cabot Explorer 733 issue of Cabot Explorer|by Carl Delfeld|Emerging Markets

Markets seem to be pausing a bit, with some stocks losing momentum while a few show surprising strength.
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Cabot Small-Cap Confidential Weekly Update

April 15, 2021|From Cabot Small-Cap Confidential|by Tyler Laundon|Small Cap Stocks

It’s been another mostly constructive week as many of our stocks inch higher and the economic picture continues to improve.
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Cabot Growth Investor Bi-weekly Update

April 14, 2021|From Cabot Growth Investor|by Mike Cintolo|Growth Stocks

Continue to go slow but have your shopping list ready. Growth stocks are gradually improving their standing, with more popping toward their highs, many holding their gains and a few finding some good-volume buying.
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Cabot Marijuana Investor Update

April 14, 2021|From Cabot Marijuana Investor|by Timothy Lutts|Growth Stocks

Nine weeks ago, as the marijuana sector was completing what looked like a climax top, I took the risky step of taking partial profits in ten of our stocks, moving to a 45% cash position.
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Cabot Dividend Investor 421

From the Cabot Dividend Investor 421 issue of Cabot Dividend Investor|by Tom Hutchinson|Dividend Stocks

This is an unusual environment to say the least. The market is looking ahead to the highest GDP growth in decades as vaccines end the lockdowns and restrictions. And forecasts continue to rise. At the same time, trillions in government stimulus will flood the...
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Cabot Undervalued Stocks Advisor Weekly Update

April 14, 2021|From Cabot Undervalued Stocks Advisor|by Bruce Kaser|Value Investing

EBITDA, or earnings before interest, taxes, depreciation and amortization, is a straight-forward measure (not a perfect measure, though) of a company’s cash operating profits. But, like seemingly all metrics published by company managements, it is usually adjusted for unusual items that may be non-recurring.
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Cabot Profit Booster 170

From the Cabot Profit Booster 170 issue of Cabot Profit Booster|by Jacob Mintz|Options Trading

This Friday is the expiration of our six April Covered Call positions. I would categorize these six positions as a good, but somewhat mixed bag, as only one trade looks like it will expire for its full profit potential (ANF), while four (TRIP, SUM, AMKR, AZEK) in...
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Cabot Stock of the Week 343

From the Cabot Stock of the Week 343 issue of Cabot Stock of the Week|by Timothy Lutts|Stock Market

The leading indexes continue to hit record highs, telling us the bull market that began over a year ago, though it is showing some signs of age, remains intact.
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The 2 Best High-Yield Stocks for a Low-Yield World

The 2 Best High-Yield Stocks for a Low-Yield World

From the issue of |by Tom Hutchinson|Dividend Stocks

Interest rates may be rising fast, but they're still historically low. The best high-yield stocks are far better investments. Here are two.
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Cabot Turnaround Letter Weekly Update

April 9, 2021|From Cabot Turnaround Letter|by Bruce Kaser|Value Investing

Today’s note includes earnings updates and the podcast.
Read More

Cabot Prime Week Ending April 9, 2021

From the Cabot Prime Week Ending April 9, 2021 issue of Cabot Prime|by Cabot Wealth Network|Cabot Prime

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
Read More

Cabot Prime Pro Week Ending April 9, 2021

From the Cabot Prime Pro Week Ending April 9, 2021 issue of Cabot Prime Pro|by Cabot Wealth Network|Cabot Prime Pro

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
Read More

VIDEO: More Stocks are Popping Higher | Cabot Weekly Review

From the issue of |by Mike Cintolo|Stock Market |

In this week's video, Mike Cintolo talks about the market's second straight constructive week with a little character change out there.
Read More

Cabot Top Ten Trader Movers and Shakers Weekly Update   

April 9, 2021|From Cabot Top Ten Trader|by Mike Cintolo|Growth Stocks

The market is putting together its second straight constructive week in our book—nothing amazing, but the Nasdaq’s surge back toward its highs has held firm, while more stocks are rounding out launching pads. Meanwhile, the broad market is mostly just sitting around, though acceptable...
Read More

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