The 2019 IPO landscape: What to do before investing

This year’s Initial Public Offering calendar has undoubtedly been
one of the busiest and maybe the trickiest. CNBC spoke to 44-year old Willis
Williams, a New York area digital marketing strategist who creates social media
marketing campaigns for businesses.

Mr. Williams also keeps track of companies that IPO globally.

His goal is always simple:  To
buy shares early enough to be able to make a kill when prices soar.

CNBC found out that Williams got hooked to IPOs back in 2013 when
Twitter went public and since then, he’s invested in dozens of companies including
Uber. He uses his brokerage account to keep track of when companies’ shares
will be available to retail investors.

After missing out on Google’s 2004 IPO that jumped 18.05% on its
first trading day, Williams hasn’t been able to resist the urge to invest in as
many companies as he possibly can with the hope of being part of the craze at
the (very) earliest.

Today, Google’s
share price has gained more than 2600% from its IPO price.

“I am a strong believer in buying into companies you use or you
really like. As soon as it opens, I buy it,” Williams said in an interview.

While investors like Williams may have had their fair share of
luck this year, there are things that investors need to have in mind before
investing in any IPO.

Thorough research is priceless

Before committing your money to a stock, it is important that you
assess the risks associated with it. If 2019 events are anything to go by, understand
that there will be wins and losses.

Take for instance Beyond Meat, whose stock was up 163% on the first trading day. But upon
the expiry of its lockup period, the meatless burger company’s stock dipped 20% as investors began dumping.

WeWork also had to recall its IPO plan following weak market
demand and valuation concerns.

“There are periods in time where the great successes are so great,
they blur out the handful that doesn’t work out,” Barry Glassman, founder and
president of Glassman Wealth Services noted.

It’s okay not to be early to the party

Participating in IPOs on the very first day can be challenging
especially since you need to have an account with a brokerage that is participating
in the listing, Certified Financial Planner Glassman said.

He also explained that deals are limited by the number of shares
offered for subscription as well as the demand for shares.

Glass
went ahead to say: “We’ve seen investors request shares, and then get a much
smaller allocation, or a token allocation, or shut out from the allocation.”

Investors
interested in investors in any IPO should start by doing background checks of
the deal with its affiliate partners including exchanges and underwriters, but
it may not be a good idea to rush into a deal just be among the early birds.

The
chief market strategist at TD Ameritrade JJ Kinahan reiterated saying: “You
don’t have to be the first one to the party. Too often, people get very excited
about a product, and a great product does not necessarily mean a great stock.”