Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why You Should Avoid IPOs

The IPO market is hot in 2013, with Twitter (NYSE: TWTR  ) bursting onto the scene and gaining 73% the moment trading began. But few retail investors got the chance to buy Twitter for the premiere price of $26 per share, and the reasons for that are cause to avoid IPOs as they hit the market.

Goldman Sachs (NYSE: GS  ) led Twitter's IPO, choosing who could get shares for $26 per share and even picking the price. This system gives Goldman Sachs and other investment banks an incentive both to pick preferred clients and to underprice the offering. Retail investors are left out in the cold as these insiders reap quick profits.

One way to get in on IPOs is when companies use a Dutch auction -- something Google (NASDAQ: GOOGL  )  did when it went public. But this isn't a commonly used method, so retail investors don't often get in on the action. 

Erin Miller sat down with Travis Hoium to see how the game is stacked against retail investors and why investors may want to stay away from the IPO process altogether. 

What stock should you be buying heading into 2014?
IPOs may not be worth owning early in their life, but the The Motley Fool's chief investment officer has just hand-picked one great opportunity in our new report: "The Motley Fool's Top Stock for 2014." To find out which stock it is and read our in-depth report, simply click here. It's free!

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2759868, ~/Articles/ArticleHandler.aspx, 9/28/2016 6:53:47 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,339.24 110.94 0.61%
S&P 500 2,171.37 11.44 0.53%
NASD 5,318.55 12.84 0.24%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/28/2016 4:00 PM
GOOGL $810.06 Down -0.67 -0.08%
Alphabet (A shares… CAPS Rating: *****
GS $163.45 Up +0.56 +0.34%
Goldman Sachs CAPS Rating: ***
TWTR $22.96 Down -0.76 -3.20%
Twitter CAPS Rating: ***