With the recently highly hyped Snap Inc. (NYSE:SNAP) initial public offering, I was once again reminded why I don’t attempt to buy into IPO's.
While big name company's first offer their stock to the general public, its call an initial public offering, or an IPO. While there are a number of issue's with buying stocks the first day they start trading, the biggest one is the hype!
The hype surrounding a big name IPO, such as Snap, Facebook, or Twitter to name a few, is that the demand for shares outweighs the supply on the first day of trading. Millions of people want shares and most fear if they don’t get them early, they will miss a big move higher. This hype and fear frenzy often causes shares to skyrocket in the first minutes to hours of trading. Snap for example rose 45% on day one.
But, after the hype fades, so will the stock price. The demand declines to the point that those looking to sell have to be willing to part ways with their precious shares for much less than they sold for on day one. Snap fell 27% on its second day of trading. Continue reading "The Only Way I Would Play The IPO Market"