How The Ipo Process Works

Personally, I believe that one of the best ways to make a ton of profit in the stock market is through IPOs. In the following article I will explain the IPO process and how you can profit in the end from the IPO process. The IPO process is quite simple and once you know it, you will become a better and possibly a very profitable trader.

The first step in the process involves the private company filing with the Securities and Exchange Commission, or SEC. The company at hand, the future IPO, files a form called the S-1 or "IPO Prospectus". In this document, it explains everything about the company from earnings, use of proceeds, underwriting and risk factors to name a few.

Like I said earlier, once you figure out this IPO process you have the upper hand, and believe me, the IPO process is simple. Reading this document and understanding it has enabled me to rake in huge profits over the past 3 years.

What I want to cover in this article is what I believe are the 3 major components which tell you how the IPO may perform.

Use of Proceeds: This part of the document explains what the company is to do with the proceeds from the offering. What I've seen in high quality IPOs are statement like, "We plan to use the proceeds from this IPO for capital for possible complimentary business acquisitions" and "We plan yo use the proceeds for research and development". This tells me the IPO is serious about growing.

Underwriting: In the IPOs I've profited from in the past, they all have one thing in common and that is strong IPO management, or underwriting. The underwriters are the managers of the deal and with sold and tried and true managers, the IPO may trend towards success. Underwriters that I have profited from are Goldman Sachs, Credit Suisse and JP Morgan.

The last component is earnings. This is pretty much self explanatory. Earnings are what drive stocks. Without them you have a lame duck that will end up losing you money in the end.

I hope at this point you understand the IPO process works and I believe that knowing this process will make you a better investor.

By: Tim W Fields

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I've been investing in IPO's for over 10 years now and by no means is this simply a hobby, it's a business for me. Over the last 10 years, I've gained a lot of inside knowledge and made gains in the thousands of percent and I'm willing to share that knowledge with you for free. Download my free e-book here >>>>> www.trinityreports.com