People discussing IPO data on a tablet
Source: istock

Retail Investors Keep Searching for the Next Afterpay IPO to Pop

By

Aug. 4 2021, Published 8:46 a.m. ET

We’ve entered a new era in investing and trading. Boredom amid the COVID-19 pandemic has led many investors to new hobbies, including day trading. With the proliferation of investing platforms like Robinhood and Webull, trading stocks has never been easier. Along with the increased trading activity, there have been stories of everyday people hitting it big with meme stocks like GameStop and IPOs like Afterpay. While it’s rare to strike overnight gold trading stocks, novice investors are still chasing the next IPO.

Article continues below advertisement

Predicting the stock market is a bit of science and a lot of luck. It’s well documented that the vast majority of day traders end up losing money. However, there are a few things that traders can look to in order to get insight on stocks on the verge of going big. While this isn’t certified investing advice, it's a few pieces of information gathered on how to find the next IPO to include in your portfolio strategy.

choosing ipo stock
Source: Getty
Article continues below advertisement

How to gauge whether an IPO is a good buy or not.

Predicting whether a company will be successful isn’t as difficult as you might think. With a little bit of research, you can gain tidbits of information about the company, its financial backers, consumer sentiments, and even regulation in the pipeline that could benefit the company going forward.

First, some companies are poised to disrupt a stagnant market like Uber or Airbnb. Afterpay took an entirely new path in the credit card and buy-now-pay-later model.

Article continues below advertisement
afterpay ux
Source: Afterpay Facebook

Second, look for companies that have repetitive products that a single customer will use over and over again. A repetitive singular business ensures that the company will have sustained sales as long as it keeps up with competition and customer retention.

Article continues below advertisement

Finally, analyzing the company's management team and financial backers shows its current state. Investors with a history of success and deep pockets are a good sign of a strong future for the company. Also, who's running the company will determine if its mission and values align with your investment strategy.

Companies poised to be purchased by giants could be an excellent investing opportunity.

As we’ve just seen with Square purchasing Afterpay, companies that ride momentum into a successful IPO garner the attention of larger, established companies. This doesn’t mean existing shareholders of the purchased company lose out. The purchasing entity will name a price per share that they’re willing to pay for the remaining outstanding shares.

Article continues below advertisement

Shares will usually climb to mirror what was just offered in the purchase deal. If the offer price is more than the current trading price, it might signal a good time to cash in. However, selecting a particular stock to throw money towards based solely on whether or not it will be purchased for a price higher than you’ll pay isn't the wisest decision.

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.