Here's How:
- Educate yourself. Initial public offerings (IPOs) of stock are one strategy for financing startups, or are made when a private company wants to raise more money for research and development, bioprocessing or clinical trials. Through the process, the sale of the first shares to the public, it becomes a publically owned and traded company. The IPO is the equivalent of a debutante’s "coming out" party. If the product has potential (is attractive), everyone wants to be part of it, so prices might jump in the early days following the initial sale, but generally they settle down later.
Don't expect to get rich right away. Trends change, and interest in IPOs waxes and wanes. In the years between 2005 and 2007, the general consensus appeared to be that it was better to invest later in a company’s development stage. That trend by investors drove the IPO climate to lower paybacks for companies, according to a May 2006 article in the Boston Globe. IPOs used to be an almost "magical" tool for executives and early venture investors to cash out, but by 2007 the money was usually just enough to fund the next stage of research, not a huge jump in prosperity.
- Do your research. Regardless of the reduced excitement and profitability in 2007, there were strong indicators (e.g. the Ernst and Young 2007 Biotechnology report) that the industry was still undergoing rapid and aggressive expansion and that some new companies are well worth the investment. For years to come, there will always be successful biotech companies to be found, if you look close enough. Check out the company history, who is running the startup and what is their background, what's in the pipeline and what are some anticipated milestones.
Watch stock listings for upcoming IPOs. Watch closely, and often, or you might miss out on a gem. A general list of IPO filings for the US market can be found on the Nasdaq website, along with performance reports. However, for strictly Biotech IPO listings, try the site maintained by BioSpace.
Tips:
- Talk to an expert. If you have questions about investing, talk to a broker. If you have questions about the science behind a startup's research, talk to a scientist. Don't go it alone.
- Don't risk more money than you can afford to lose. The biotech market is a volatile one.
What You Need
- An investment bank account (to do it yourself).
- In investment broker, if you don't want to make the orders yourself.
- A computer and other news media to find IPO offerings and do research.
- Disposable cash flow (money you can live without/invest and forget about).