A Guide to IPO Investing

Investing in initial public offerings (IPOs) has been and continues to be largely reserved for institutional investors.  To clarify, we’re referring to the right to buy shares in a company prior to the shares trading on the open market.
Occasionally, individual investors can get in on the IPO action, maybe to the tune of a hundred shares, if they’re lucky.  While 100 shares is probably chump change to institutional investors, it could prove to be a sizable holding for an individual.
However, given the difficulty for individual investors in acquiring pre-IPO shares, we choose to focus this month’s education piece on recent IPOs, or companies that recently had an IPO and whose shares currently trade on the open market.  It should be noted that even institutional investors often don’t get all of the shares they want on the offering, and make subsequent purchases in the aftermarket.
Investing in recent IPOs is much like investing in seasoned stocks, with the noted exception of the limited availability of information.  If a firm is a recent IPO, a good place to start your research is the prospectus, also know as the S-1 filing.  The SEC does a great job of posting S-1 and S-1/A (amendment) filings on its EDGAR site (Example: Salary.com's S-1/A filing).
The prospectus generally provides information related to the offering details, the company’s business, its markets, its products, its strategies, risks associated

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