3 Recent Canadian IPOs To Watch Out For In The Next Decade

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IPOs or initial public offerings have always excited investors. It is the process of offering shares of a private corporation to the public in a new stock issuance. Before an IPO, a company is private with limited shareholders including the founders and some private investors. In other words, a typical stock investor cannot buy stocks of a private company. But once a company decides to go public and lists on an exchange, any investor can buy its stocks. 

To understand how an IPO works, consider that you have a very successful business in your city and you are looking to expand your business throughout the country. To do so, you decide to issue shares of your company to raise enough cash for inventory, marketing, staff, etc. Generally, a company issues an IPO to support its expansion and growth efforts. This means it provides investors an opportunity to invest in a company that is eyeing rapid expansion. Growth stocks are able to generate massive wealth over the long-term and IPO investors can get in on the ground-floor of this growth. 

For example, if you would have invested $1,000 in Shopify stock (SHOP), you would have returned a staggering $55,000 in just over five years. Investing in an IPO does come with a certain amount of risk. As an investor, it is up to you how much risk you are willing to take. According to Investopedia, you can consider certain factors before investing in an IPO:

  • Search for information on the company, its competitors, overall industry, and press releases. This will give you an overview of the health of the company.

  • Look for a company that has strong underwriters. In general, quality brokers bring quality brokerages.

  • Be cautious and read the prospectus. It lays out the risks, opportunities and proposed uses of the money raised from the IPO.

A publicly traded company shows that it has been able to meet the federal regulations required to be publicly traded, giving investors a sense of stability. Investors generally invest in an IPO treating them as long-term investments. 

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