Forget WeWork, Uber, Pinterest and Lyft! Here’s How to Safely Make Money from IPOs!
Ever get that feeling you’re missing out on some of the hottest stocks on Wall Street?
If you’re retired, or close to retirement, one of your biggest priorities should be protecting the wealth you’ve worked so hard to accumulate. And a lot of times, that means taking a more conservative approach with your investments.
There’s nothing wrong with collecting steady dividend checks and watching the value of your brokerage account steadily grow. But there’s still something frustrating about watching hot new stocks start trading in the market, and seeing the prices for these stocks jump sharply higher.
The IPO market is one of the most exciting areas on Wall Street right now.
These deals can be extremely lucrative.
And they can also be extremely risky.
For example, you may have seen Pinterest (PINS) earlier this year priced its IPO at $19 per share. This means the first public investors in PINS got their shares at a price of $19, just before the stock soared 84% to hit a high above $35 just a few days later.
Talk about a great profit opportunity! Most investors would kill to make that return in two years. But PINS jumped that high in less than two weeks!
Similarly, Zoom Video Communications (ZM) priced its IPO at $36 and then saw its shares move as high as $66 before closing at $62. That represented a 72% gain in one single day!
I don’t blame you if you’re turning green with envy right now.
But before you call your broker to figure out how you can get in on the next hot IPO, consider the risks.
Shares of Uber Inc. (UBER) priced their IPO in May at $45 per share. This was one of the most highly anticipated IPOs of all-time. Investors have been excited about this deal for years.
Yet, within 24 hours, UBER shares dropped as much as 20%, leaving investors wondering what to do with their losing position. This is not the spot you want to be in when investing your retirement funds.
It’s exciting to invest in stocks that can vault sharply higher in a short amount of time. But is there a smart way to do it without the risk of suffering big losses?
Today, I’ve got a way for you to do just that.
And just in time too, because we’ve got a host of new IPOs coming out in the next few weeks with potential for some exciting gains!
Bagging a Win Every Time a New Stock Starts Trading
You’ve probably heard that the people who really made a killing during the gold rush were the shop owners selling supplies to the speculators.
That same concept applies to Wall Street.
The ones who consistently make the big bucks when these new stocks start trading are the investment banks who sell shares to their clients.
When a typical IPO is priced, shares have to be placed with individual or institutional investors. And then those shares are free to be bought and sold in the open stock market.
Wall Street investment banks place those first shares with their clients and charge a fee for their “service.” The fees for each individual deal vary, but a good rule of thumb has these Wall Street “underwriters” collecting 3% to 5% of the value of shares sold.
Consider WeWork, which is expected to have a valuation around $20 billion. Not all shares of this company will be sold to the public in this offering. But if just 10% of the company is included in this IPO, Wall Street investment bankers stand to collect fees between $60 million and $100 million.
And that’s just for one of the dozens of new IPOs slotted to be priced over the next year!
So if you’re like me and you appreciate hefty gains, but despise taking too much risk, it stands to reason that investing in Wall Street’s investment bankers makes a lot of sense. After all, these companies get their fees whether an IPO trades higher or lower!
Now let’s get to the 5 Must Knows to start your week…
5 Must Knows for Monday, September 16th
Oil Field Attack Spikes Prices — World energy markets are in disarray after drone strikes crippled two oil plants in Saudi Arabia on Saturday. 5.7 million barrels of daily production are estimated to be knocked offline — approximately half of Saudi Arabia’s capacity.
In response, President Trump authorized oil to be released from the U.S. Strategic Petroleum Reserve if needed to stabilize markets. WTI Crude is higher by 10% as of Monday morning. Iran-allied Houthi rebels have claimed credit for the attack.
WeWork’s Pathetic IPO — The We Co. roadshow is set to begin this week. This is a series of marketing conferences and meetings where the company discusses their business model with Wall Street investment banks and their wealthy clients. Usually these roadshows last anywhere from a few days to weeks, so be on the lookout for the IPO shortly after it’s completed.
But beware, because this IPO is the new poster child of what’s wrong with today’s tech “unicorns.” WeWork loses billions of dollars annually. And their corporate governance practices are shady at best (borderline illegal).
GM Workers Strike — Nearly 50,000 General Motors employees took to the streets this morning to protest employee pay and benefits. Production across the U.S. is expected to be halted until a new contract is ratified, affecting 33 manufacturing plants in nine states, as well as 22 parts distribution warehouses. The strike is the first against GM since a two-day walkout in 2007.
Earnings on Deck — There’s a few earnings reports to keep an eye on this week. On Tuesday, Cracker Barrel, Adobe, FedEx and Chewy report earnings. On Wednesday, General Mills reports earnings. And on Thursday, look for Darden Restaurants’ report before the opening bell.
OxyContin Maker Files for Bankruptcy — Perdue Pharna, owned by the infamous Sackler family and maker of OxyContin, filed for bankruptcy on Sunday in order to wipe out over 2,000 lawsuits against the company and its owners.
The settlement calls for Perdue Pharma to be run by a trust, with profits going to states, cities and counties that are seeking reimbursement for tax dollars spent combating the opioid crisis.
That’s all from me today. I’ll continue keeping a close eye on these major events impacting your retirement account. As always, stick with The Daily Edge for the latest.
Here’s to growing and protecting your wealth!