Many people tend to invest only in IPOs (initial public offering) and refrain from investing in secondary markets. While there is no doubt that IPOs are a good way to make money but it is not necessary that every company initial public offering is good and investor will make money out of such investment. Many investors who have invested in wrong IPOs are still not able to get the price of their stock. Therefore one should keep following factors in mind before applying in IPOs
1. First and foremost thing to look for is who is the promoter or owner of the company in which one is thinking to invest, because it is the promoter or owner who runs the show and therefore if promoter is a person of integrity and honest then one can be sure that he or she is not giving the money in wrong hands.
2. The reason for which company is bringing the initial public offering, therefore looking into the objects of issue in prospects of an IPO is of paramount importance.
3. Past performance of a company which includes sales and profits of company during past years, amount of debt in the balance sheet of the company and also how company stands in an industry against its competitors.
4. One should look into the business of the company, so that one can identify the future prospect of the business of the company as performance of a stock is dependent on how the businesses of the company will perform in future.
Apart from above factors there are many factors which investor can look into depending on the company which is coming with the IPO and also the market condition at the time of such issue.