Understanding Investments In Pre IPOs In The UK

by Bella Palmer

Recently, pre IPO shares have been gaining a lot of popularity in the UK. As a private investor, if you want to trounce fellow public investors on the same investment then the best way of doing so would be to go for pre IPO options. For instance, on purchasing shares at the IPO, one can make about 116% whereas by opting for investment prior to the IPO, it is possible to earn as much as 381%! The difference is definitely quite massive. It is also possible to lose money on IPO day, which is why pre IPO shares in the UK markets are the way to go because these can provide doubles or triples with minimum risks.

Irrespective of how beneficial it may sound, it is best to understand the concept of Pre-IPO investment completely before you go for it. Well, this is a kind of investment option that is available to private investors before the Initial Public Offering of IPO is slated to arrive in the market. Private investors having massive hedge funds or private equity are generally the ones who take up this type of investment. Thanks to the size of the investment, the prices of pre IPO placement shares are generally lower than the possible IPO prices.

One of the things to keep in mind when it comes to this type of investment is that they come with a lock-in period to prevent the hedge funds and private equity from selling these shares in the short run. After all, these are essentially long-term investments. Therefore, it is advisable to think well before investing in these and only go for them when you’re completely fine with the terms and conditions.

While investing in private equity may offer a big upside potential, it is not just about investing in pre IPO stocks, the company whose stocks you’re purchasing also matters. It would be wise to opt for companies that have a good reputation so as to reduce the chances of shady transactions. Thus, you should definitely take out some time to conduct research on the prospective company and dig up background information about the same so that you can decide as to whether it is a wise decision to purchase its pre IPO shares or not.

There are many tips to keep in mind when you’re going for this kind of investment in the UK markets. The proverb ‘The early bird gets the worm’ definitely applies here. Thus, the sooner you act, the more profit you will gain when you’re investing in a start-up. For instance, private investors who have invested in Facebook in as early as 2005 had gained as much as 200,000% when the social networking website finally went public in 2012! Of course, for this reason alone pre IPO investment options aren’t everybody’s cup of tea because some individuals do not like the idea of waiting for an extended period of time before making a return. Moreover, some also do not like to invest significant amount of money on companies which are unproven.

This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Related News

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Know more