Pre-ipo investments allow investors to buy shares of a company before it gets listed on a public stock exchange.
Pre-IPO stocks are stocks of companies that are yet to go public. You will be one of the company’s important shareholders and a part of its growth as a pre-IPO investor. It is also possible to earn a huge profit when the company goes public.
To conclude, pre-ipo investing can offer high growth opportunities, but investors must understand the risks before investing.
Pre-IPO
Short version: “Pre-IPO” refers to shares of a company sold before that company
goes public (before its initial public offering). These can be primary shares (newly
issued by the company) or secondary shares (existing shareholders selling). Pre-ipo investing gives access to private-company growth (and risk) with the goal of profiting when the company lists on a public exchange.
Below I’ll explain how the Pre-ipo process works from both the company side
and the investor side, plus key terms, timelines, benefits, and risks.
pre ipo Key terms you should know
Primary vs Secondary
Primary = company issues new shares;
Secondary
existing holder sells their shares.
Lock-up
Agreement preventing sale for a set period after IPO.
Accredited/Qualified investor
Regulatory status required to buy private offerings.
Cap table
Who owns what % of company; crucial for dilution and proceeds.
Liquidation preference
Rights that affect who gets paid first on exits
Convertible note / SAFE
Alternative instruments that convert to equity later
Bookbuilding
Process underwriters use to discover IPO demand and set price.
- Potential for high returns if company does well at IPO.
- Earlier valuations are often lower than IPO price.
- Possibility of preferential terms (board seats, protective provisions).
Risks and downsides
High risk / illiquidity — shares are often hard to sell until IPO or a
secondary event.
Valuation uncertainty — private valuations can be inflated; IPO may
price lower.
Regulatory & market risk — IPO market conditions may change (deal
can be delayed/cancelled).
Information asymmetry — private companies disclose less than
public ones
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