Pre-IPO stands for Pre-Initial Public Offering. In the financial market, Pre-IPO shares are the equity shares of a company that are offered to investors before the company becomes publicly listed on a stock exchange.
In Simple Terms:
Pre-IPO investing is buying shares in a private company before its IPO, usually at a discounted price compared to the expected listing price.
Key Features
Private Placement: Offered to select investors—typically institutional investors, venture capitalists, private equity firms, or high-net-worth individuals (HNIs).
Higher Risk, Higher Reward: Investors bet on the company’s future success and get in early.
Lock-in Period: Often includes a lock-in, meaning investors can't sell immediately after the IPO.
Benefits
Early entry: Potential to gain big once the company lists at a higher valuation.
Access to high-growth companies: Especially in tech, biotech, or startups.
Valuation advantage: Often priced lower than IPO listing price.
Risks
Illiquidity: Can’t sell easily before IPO.
No guarantee of IPO: The company might delay or cancel the IPO.
Valuation risk: The stock might list below expectations.
Limited access: Not usually available to retail investors.
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