Pre IPO Investing

What is Pre-IPO Investing? Can You Invest in Pre-IPO Stocks?

Pre-IPO investing is simply the practice of investing in a company’s private shares which are lower than what they would be post an IPO.   allows investors to buy stocks through equity funding in anticipation the stock will rise after the IPO. In this Blog, we will touch upon how one can participate in the process of pre IPO by making some basic moves. Basically Pre IPO investing is a focused punch for investors who wish to buy stocks or shares for a particular company just before it goes live.

How does Pre-IPO Investing work?

Prior to raising the IPO, a company has to look for funds that would support its growth, finances, or plans of expansion by issuing pre-IPO stocks to investors. Such stocks are generally offered via Private Placement rounds or through equity crowdfunding portals.

At this stage of pre-IPO, a company would be in a stage of growth, which could be a high risk high benefit point. A company that has performed quite well in the past is likely to get more investors post its IPO, thus investors in the pre-IPO phase are likely to get handsome returns on their investments. Pre-IPO shares do tend to have a lower price than they will once the company has made its listing and entry. For the investors that are brave enough to take the chances, this could be a fantastic opportunity.

Can You Invest in Pre-IPO Stocks?

Investing in pre-IPO stocks has historically been exclusively undertaken by a handful of individuals such as wealthy individuals, institutional investors, and venture capitalists. But this landscape of investment has changed and there are now pre-IPO opportunities that accredited individual investors can gain access to using a couple of different means.

1. Private Equity and Venture Capital Firms

Another major way of pre-IPO investing in terms of stock is through private equity or a venture capital firm. Such investors stand a chance of having access to startups that opt to have a crowdfund due to the fact that the firm has interest in early stage companies. These occasions mainly focus on high-profile people and are normally available for them.

2. Equity Crowdfunding Platforms

Some online platforms have democratized access to pre-IPO stocks by allowing accredited investors to purchase shares of private companies. These platforms can provide a good way for small investors to participate in financing the company before its IPO.

3. Secondary Market

In certain situations, pre-IPO shares can be purchased from the secondary market, where existing shareholders sell their shares after the IPO. VSRK Capital is such a platform that enables the sale of Pre-IPO stocks creating a window of opportunity for accredited investors to buy pre-IPO stocks in the marketplace from existing investors.

Pre IPORisks of Pre-IPO Investing

It may be true that investments in the pre-IPO phase can yield high returns, but there are risks involved as well. Private companies often lack a record of success and are mostly at the initial stages of expansion. And then of course, there is also the chance that the company may not perform as expected, or meet certain regulatory requirements after its public offering.

Moreover, the pre-IPO phase is highly illiquid as well. This implies that if an investor, for whatever reason, feels the need to liquidate his/her shares before an IPO takes place, it may not be easy for him/her to find someone ready to buy the shares.

Conclusions

Investing in the pre-IPO phase makes it possible for a wide range of investors who intend to participate in the formative stages of a firm’s growth. By acquiring shares at the pre-IPO stage, an investor stands a chance of making great returns if the company does well in the capital markets after its initial public offering.
However, it is crucial to know and understand that buying shares in the pre-IPO equity stage comes with its fair share of risks, such as lack of liquidity and chances of underperforming as well. So, if you are a verified investor wanting to add to your portfolio pre IPO investment strategies, ensure you know what risks are involved in ladders and do your due diligence.

FAQs

How do I search for Pre-IPO opportunities?
You can get pre-IPO investment by checking out equity crowdfunding. Usually, the firms offer early investment opportunities in high-growth companies. Pre-IPO shares can also be bought from some platforms like VSRK Capital that provide options to buy pre-IPO shares from secondary market platforms.

What is the minimum investment amount for Pre-IPO shares?
The minimum investment in pre-IPO shares of a company in the secondary market depends upon the platform and lot size. For platforms like VSRK Capital or secondary market exchanges, the minimum amount required would be ₹1 lakh to ₹5 lakh, depending on the size and stage of the company. Always check the specific terms and conditions of the platform before investing.

Can a retail investor buy Pre-IPO shares?
Yes, retail investors can invest in pre-IPO stocks through the secondary market that is often provided by platforms such as VSRK Capital, though with a minimum investment requirement that is more significant.