Whether you're new to the stock market or have been investing for years, initial public offerings (IPOs) can be exciting.
An IPO happens when a company begins offering shares of stock for the first time. For investors, this can be a fantastic opportunity to get in on the ground level, so to speak. If that company ends up becoming the next Amazon, for example, you could potentially make a lot of money over time.
As we continue into the new year, it could be a smart opportunity to invest in fresh stocks. Could any of these three IPOs be a good fit for your portfolio?
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1. Amylyx Pharmaceuticals (AMLX)
Amylyx Pharmaceuticals (AMLX 3.07%) is a clinical-stage pharmaceutical company focused on creating treatments for neurodegenerative diseases, specifically amyotrophic lateral sclerosis (ALS). It issued its IPO on Jan. 7 at $19 per share, raising $190 million in funding.
Recently, Amylyx submitted an application to the U.S. Food and Drug Administration (FDA) for AMX0035, its drug that aims to treat ALS. The FDA approved the application, setting a target date of June 29 for its regulatory decision. If the FDA eventually approves the drug, it could become a potential new treatment for ALS.
2. Vigil Neuroscience (VIGL)
Vigil Neuroscience (VIGL +0.00%) is a biotechnology company that also creates treatments for patients with neurodegenerative diseases. It went public on Jan. 7 with a stock price of $14 per share, raising a total of $98 million after the close of its IPO.
The organization was launched in 2020, and it is the world's first microglia-focused therapeutics company. It focuses on improving the performance of microglia cells, which are responsible for protecting the brain against neurodegeneration. Through its precision medicine approach, Vigil Neuroscience aims to create treatments that can restore microglia performance and improve brain function.
3. CinCor Pharma (CINC)
CinCor Pharma (CINC +0.00%) is a clinical-stage biopharmaceutical company focused on creating treatments for cardio-renal diseases.
Its lead clinical candidate, CIN-107, was created to help patients with hypertension, or high blood pressure, who have not achieved high blood pressure control through other treatments. The company went public on Jan. 7, raising more than $193 million at a price of $16 per share.
Should you invest in IPOs?
IPOs can be an exciting investment opportunity, but they can also be risky. Before you buy, it's important to consider the big picture.
Companies that are brand-new to the stock market don't have a long track record, making them higher-risk investments. Investing is a long-term strategy, and it's best to only buy stocks you plan to hold for at least a few years or, ideally, decades. Because IPOs don't have a long history, it can be tough to tell whether they'll make solid long-term investments.
Also, IPOs can sometimes be overhyped, adding another layer of risk. An IPO's price is based mostly on speculation, as nobody knows for certain how the stock will perform. In some cases, stocks perform well during an IPO, but their prices eventually sink when they don't live up to the hype.
This isn't to say that you shouldn't invest in IPOs. However, if you've got your eye on a particular IPO, consider waiting around 6 months to buy. During that time, you can continue researching the stock to see how it performs over time.
IPOs aren't for everyone, but it never hurts to stay up-to-date on the latest companies joining the stock market. By doing your research and maintaining a long-term outlook, you can invest in IPOs safely.
