Speculators Can Experience Lucrative Returns Essay

761 Words Aug 1st, 2016 4 Pages
Speculators can experience lucrative returns, as well as hefty losses, from initial public stock offerings (IPOs). Investment experts report that several factors can determine IPO rates. A simple formula reveals the initial price range, which then fluctuates based on demand. The issuing firm’s leadership pool can factor into this sentiment, as well as how a firm and its shareholders conduct business.

Several Factors Determine Pricing

A ShareInvestor article identifies several key components that determine an IPO price and cautions that initial public offerings are inherently riskier than regular stock purchases [1] The investment education portal advises speculators to deeply research firms before their committing funds and clearly understand how an enterprise intends to use the capital. By investigating company executives, potential stock buyers can try to predict how those leaders will perform in their current positions. The company financial history is also a key indicator of future performance.

Complex Facts Determine the Initial Price Range

To evaluate a firm’s initial IPO price range, discount investment brokerage Loyal3 directs potential stockholders to research the facts that the underwriter - a separate entity that helps firms manage trades – used to set the rate. [2] The underwriter evaluates complex metrics to arrive at the initial price. Investors can learn the criteria used to determine this by reviewing the preliminary prospectus.

The brokerage also…

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