Pre IPO Investment - Where To Find Pre IPO Companies | The Communication Blog

Saturday, January 1, 2011

Pre IPO Investment - Where To Find Pre IPO Companies

By James Scott

For diversified investors, the IPO is the holy grail of all investments. Why? Because of the higher yields involved with a company with a great concept that is about to step onto the scene and change the order of an industry. Many times the investors are able to take advantage of a deeply discounted stock price compared to the retail price available to the mainstream.

For those who have experienced the power of an IPO, the next natural stage is the Pre IPO. A Pre IPO investment a few months before the company is issued a trading symbol is the creme de la creme of all stock investments. Many times investors are offered warrants for discounted future offerings with the company; the stock is typically discounted deeply to the IPO price, which in turn is discounted to the retail price. The investment mechanism is typically done via Private Placement Memorandum using rule exemption 506 of Regulation D.

Investors should make sure that the PCAOB audit and S1 authoring are underway or completed before going into an investment. The company should offer potential investors a package which includes a solid business plan, PPM stating risks and a valuation from which the share price originates. The share price will come from the valuation, number of authorized shares, total amount of capital to be raise pre public etc.

Another deal aspect to pay close attention to before investing is the market creation process put in place by the company. A strong Investor Relations and publicity campaign is crucial to generating interest in an IPO and this strategy should be put in place during the company's comments phase with the SEC (if it is an OTCBB listing the company is initiating).

A solid investor relations campaign will consist of, at a minimum, two press releases per week, phone room assistance to introduce the company to the broker and investment market, SEO campaign, iTunes company and industry position downloads for interested parties, webinars, investor newsletter as well as radio, TV and university expert panel interviews and other public interactions to make the public aware of the company, product/service and stock symbol.

The above is just a Pre IPO investor introduction to help seasoned investors with their due diligence process and portfolio diversification.

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