pre-IPO

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Pre-IPO

An offering of shares in a company before its initial public offering (IPO). Pre-IPO offerings are available only to a limited number of individuals, and are done in advance of an expected IPO. Pre-IPO prices are generally much lower than they would be at the IPO, but are risky for the investor, as their value is contingent upon the company eventually making an IPO. This is because pre-IPO shares attract little demand in situations in which there is insufficient demand for an IPO soon after; they usually become illiquid securities.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

pre-IPO

An offering of a company's shares prior to the firm's initial public offering. Investing in a pre-IPO tends to be very risky, in part because the planned IPO may never take place. In addition, shares from a pre-IPO are unregistered and are likely to be very difficult to sell until the public offering is completed.
Case Study Acting Securities and Exchange Commission chairman Laura Unger told a congressional subcommittee in July 2001 that 16 of 57 analysts reviewed by SEC staffers had invested in 39 pre-IPOs of companies they subsequently covered. In most cases shares offered in pre-IPOs are priced substantially lower than the subscription price in the subsequent IPO, meaning that many analysts who participated were able to acquire shares at very low prices. The conflict of interest is clear: analysts are likely to have a personal interest in promoting stocks they own, thus tainting the independence of their recommendations. Corporations are anxious to have analysts come on board as shareholders, in part because of the creditability analyst ownership conveys to the investing public. Analyst ownership may also result in positive investment recommendations that become a marketing campaign for the firm's stock.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Brussels, Belgium, February 20, 2015 --(PR.com)-- Following on from the successful expansion of their institutional and retail client division, due in large part to their involvement in the hugely profitable Pre IPO, Alibaba, Grant Becker Associates CEO, Pascal De Becker said "We are creating a niche for ourselves through our team of dedicated and talented analysts, by targeting select companies and acquiring stock in these firms which are seeking to list on one of the major bourses.
"We are also in discussions to obtain Pre IPO stock in other upcoming listings.
9 -- Exhilway, the US based leading $2 billion hedge fund has announced revamping of its alternative trading platform (ATP) to simplify private stock trading for the global emerging / pre IPO companies.
But he said that other factors also include the potential accounting costs of granting options pre IPO, which may be less of a concern for companies seeking to list on AIM than for established listed companies.