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Is IPO Mania Inflating a Market Bubble?

Only the richest and most U.S.-friendliest investors get the opportunity to make money

Evgeny Pundrovskiy, CFA, Director of Investment Department UFG Wealth Management

Thanks to the unprecedented liquidity injections from the world central banks, stock markets have taken off extraordinary in 2020. This has affected the IPO market around the world. In 2020, 1,415 companies went public and their volume exceeded $ 330 billion, which was a new record dating back to the beginning of the new century.

However, investments during the IPO were not always profitable. The most illustrative stories in the recent past - Uber and Lyft. Their capitalization fell immediately after going public.

Recently, some companies have gone public at later stages. For example, Uber and Airbnb announced an IPO when their estimates had already exceeded $50 billion. At the same time, most of the companies in the IPO market are still unprofitable, although they have been valued at several billion or even tens of billions of dollars.

Therefore, before investing in an IPO:
1. Diversify risks
2. Discuss with your financial advisor the liquidity of your package and the possibility of selling after the IPO
3. Make a risk management plan.

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