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Investment bankers love to brag about successful initial public offerings – like the one earlier this year from Spark Therapeutics Inc. (Nasdaq: ONCE).
That's because IPOs can be a great source of wealth. Since Spark, a gene therapy biotech firm, began trading Jan. 30, the stock is up roughly 100% from its offering price of $23.
But here's a little secret that Wall Street doesn't like to talk about – most retail investors can't get anywhere near hot IPOs like Spark's.
The vast majority of these initial shares are allocated to mutual funds, hedge funds, pension funds, insurance companies, and high-net-worth individuals. That means retail investors like you have to pay a premium for the stock after it's already begun trading, seriously cutting into your profits.
So today, I'm going to show you a way to side step Wall Street and play the IPO boom…
IPOs: I'm a Believer
Don't get me wrong. I'm a big believer in IPOs.
IPOs are one of the main reasons why Silicon Valley can bring us a steady stream of innovations. Initial offerings give entrepreneurs the opportunity to go from early-stage startups to publicly traded firms in just a few years.
And you'd be hard pressed to find a better IPO environment than we have right now.
Some 275 companies went public in the United States in 2014, the highest number in 14 years, according to market trackers Renaissance Capital. The total value of 2014 U.S. IPOs was $85 billion, a 55% increase from 2013.
High-tech and life-sciences firms played a big role there. Together, they accounted for 57% of new issues.
While it may not eclipse 2014′s boom, this year is already shaping up to be another big one. Roughly 200 firms are on track to issue stock this year.
And that will create a lot of wealth.
About the Author
Michael A. Robinson is a 35-year Silicon Valley veteran and one of the top technology financial analysts working today. He regularly delivers winning trade recommendations to the Members of his monthly tech investing newsletter, Nova-X Report, and small-cap tech service, Radical Technology Profits. In the past two years alone, his subscribers have seen over 100 double- and triple-digit gains from his recommendations.
As a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs and high-profile industry insiders. In fact, he was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon. And he was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
In addition to being a regular guest and panelist on CNBC and Fox Business Network, Michael is also a Pulitzer Prize-nominated writer and reporter. His first book, "Overdrawn: The Bailout of American Savings" warned people about the coming financial collapse - years before "bailout" became a household word.
You can follow Michael's tech insight and product updates for free with his Strategic Tech Investor newsletter.