How do I buy IPO’s like Blackstone Group? Is it available to the average Joe?
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Think of IPOs like hot concert tickets to the hottest band playing in your area. Now, think of large financial giants like very rich ticket scalpers.
You can go ahead and wait in line for tickets, but chances are, there are already 3-4 people in front on you by the time you get there. Unlike tickets, there is no limit to how much each financial giant can buy; (well, no more than 20% of the company). So, for any given IPO, there will always be a raid on the initial offering at around 15% more than the initial offering price. This will guarantee that these financial giants outbid any other investor for this IPO.
Now comes the part that is unlike the ticket like, but which works to your advantage. You are free to outbid these giants! On the days that follow the IPOs’ entrance into the market, these financial giants slowly sell off the shares for profit. They can make anywhere from 60-90% gains in the first two-three weeks! Now, if that’s the case, why aren’t you getting a piece of this pie? Risk is obviously the reason! You are not large enough to afford the risk of the IPO crashing! However, for IPOs you are interested in, you can more than afford to bid around 30% more than the IPO’s price that first day, and capture some small amount of shares for yourself. You will then be able to sell them off in the next two-three weeks to realize any gains from frantic investors still wanting to buy the shares.
Talk to your stock broker, CFA, or Accountant for advice on the market preformance on when it’s a good time to sell, or if it’s even a good idea to buy. The tragety with IPOs is that they don’t always come into the market when the market is preforming well. As a result, they come with VERY high risk!
However, to answer your question, IPOs are still very attractive as an investment. If you can maintain a portfolio with a relatively low beta (1.1~1.3), then you can afford to introduce a high risk investment into the mix, without hurting your portfolio’s variance, so you should be able to absorb the risk of loss from the IPO pretty well, and the reward should more than make up for the risk in the first 2-3 weeks!
Hope that was helpful, Best of Luck!