Dropbox and Spotify both made news with their S-1 filings, but long-term investors will probably want to wait before buying in.

In this Industry Focus: Tech clip, host Dylan Lewis and Motley Fool contributor Evan Niu explain why investing in a fresh IPO is so risky, why it's better to wait a while to see how things shake out, and what to watch during a company's first few quarters in the public markets.

A full transcript follows the video.

10 stocks we like better than Walmart
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, the Motley Fool Stock Advisor, has tripled the market.* 

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Walmart wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of March 5, 2018
The author(s) may have a position in any stocks mentioned.

 

This video was recorded on March 2, 2018.

Dylan Lewis: Evan, one last commenter, from someone on Twitter, Wei, hearing that we were going to be talking about an upcoming IPO, said, "Never will Dylan ever buy an IPO offering." So, I guess people are listening to the old shows, because that goes back to Never Will I Ever Week in mid-2017. I think that generally wraps things up for us. We love doing these prospectus shows. It seems like we always come to this conclusion at the end where, even if the valuation looks great when it starts trading, we want to see several quarters of good results and a sense of how management handles the scrutiny of being a publicly traded company.

Evan Niu: Right. I never participate in IPOs directly, because they're so risky, there are so many factors, they're so volatile. I'm in the same boat. I want to see a couple quarters, I want the market to calm down a little bit. A lot of times with IPOs, there's a lot of hype, and sometimes they drive the price up and maybe it's not justifiable. I also wait a couple of quarters to let things shake out and settle down before I make any decisions.