Uber IPO: Is it a good idea to invest in IPOs?

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Uber on smartphone
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Uber is getting ready to make its initial public offering (IPO). That means shares of the ride-hailing company will be traded publicly for the first time — potentially giving anyone access to own a piece of this fast-growing company.

But are IPOs in general — and this Uber IPO in particular — a good bet for your hard-earned investment money?

Uber IPO: Opportunity or hazard? 

There is a lot of interest from investors whenever a high-profile company goes public. Such is the case with Uber, the on-demand transportation company that lets you summon a ride from your smartphone. Uber is set to make its public debut later this week surrounded by a lot of hoopla.

In this article, we’ll take a look at what money expert Clark Howard says about IPOs in general and the Uber IPO in particular.

What you need to know about the Uber IPO

Uber expects to price nearly 180 million shares at around $50 each, according to an amended filing with the Securities and Exchange Commission.

The price range would value the company at some $84 billion. Look for the stock to trade under the ticker symbol UBER when it hits the public market.

Uber’s IPO comes on the heels of competitor Lyft’s IPO in March.

“Neither company has ever been profitable,” money expert Clark Howard notes. “So it’s hard to get excited about the stock of a company that hasn’t figured out how to make money.”

Are IPOs a money-making opportunity for you?

The thing about IPOs is that everybody hopes they can get in on the ground floor of the next Google or Amazon. But is all the hype around the Uber IPO — or any IPO, really — warranted?

To answer that question, it’s best to look at a recent historical example: Facebook.

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Back when Facebook went public in 2012, interest was high in investing in the booming social media network.

Facebook shares first started trading in May 2012 at $38. But they soon went down to around $20 a share by September of that year. The stock would not get back to the level of its IPO price until August of 2013.

The danger with any company going public is that the company is overvalued and debuts at too high of a stock price. So when the market’s expectations reset and the share price comes back down to Earth, a lot of people who bought the IPO panic and sell well below the original IPO price. But that just locks in their losses.

If you’re going to buy into an IPO, treat it like a long-term investment — not a get rich quick scheme.

If you did that with Facebook, you would have bought at $38 and eventually ridden a big climb in price to around $189 a share at last check.

Clark compares buying into an IPO to buying a lottery ticket.

“So if you like gambling, that’s what you’re doing,” the consumer champ says. “Could you make serious money? I don’t know. Just know this is not normal investing.”

“My advice is know what you’re getting into. And never put more at risk than would keep you from sleeping at night if you lost all that dough.”

How the average Joe can buy an IPO

IPO access is generally limited to high net worth individuals and institutional investors.

But there are a couple of ways for retail investors to get a piece of the pie for select IPOs:

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  • Motif Investing – Requires $250 minimum to participate in select IPOs
  • ClickIPO – No minimum required, but there is no guarantee of allocation of shares, either
  • EquityZen – Offers access to pre-IPO companies with a $20,000 minimum investment, but is only open to accredited investors (generally those with a net worth of $1 million or more)

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