How to Truly Profit from the Next Wave of IPOs

By Matthew Milner, on Wednesday, December 12, 2018

Many of this decade’s fastest-growing tech companies are finally on the verge of going public.

These IPOs are the most anticipated financial events in recent history. They’ll make many investors very, very rich.

So what should you do?

Are these once-in-a-lifetime IPOs that you can’t afford to miss?

Or are they overpriced duds that you’ll lose your shirt on?

Let’s take a look.

The Next Wave

There's been a lot of news lately about next year’s wave of IPOs:

Uber, Airbnb, Palantir, Lyft, Pinterest — these are some of the fastest-growing private companies in the world, and as a result, they’re already extremely valuable.

Uber, for example, is worth $72 billion; Airbnb is worth $31 billion; and Palantir is worth $20 billion — and again, these are still considered by many to be “startup” companies.

Fueled by an endless supply of capital from big private investors, these start-ups have been able to stay private for as long as they want. They’ve had no need to go public just to access capital.

But for investors like you, this creates a big problem:

By the time these companies go public, there’s very little money left to be made!

Times Have Changed

In the “old days” (I’m talking about just 10 or 15 years ago), a company would crash through the IPO gates as soon as it could, and it was rare to see a private start-up with a valuation exceeding $1 billion.

In the year 2000, for example, there were just 10 such companies.

But today, there are 295 of them…

That’s the highest number of billion-dollar start-ups in history.

What’s this mean?

Simply put, it means more, even most, of a start-up’s value gets created before it goes public.

And it’s not stock-market investors who are capturing all that value…

It’s private-market investors.

Guaranteed Profits

It’s always challenging to put a value on companies like Uber or Airbnb — start-ups that are disrupting massive industries like transportation and hospitality and growing like a weed.

For example, many thought Facebook was wildly overvalued when it was a start-up worth $1 billion. Today it’s valued at more than $400 billion.

The Wall Street Journal reported that Uber’s IPO might be priced at $120 billion. Could stock market investors make money if they buy shares when it’s already worth that much?

Well, it’s possible. If Uber can keep growing, it might become a great success story.

But it could just as easily turn out that Uber’s IPO will hand these investors big losses.

For example, look at Snap (NYSE: SNAP):

Snap recently went public at $17 amid great excitement. But it hasn’t lived up to its potential at all. Today it trades at about $5 a share.

It’s the same story with meal-kit company Blue Apron (NYSE: APRN). It priced its IPO at $10, but it currently trades at about $1.

Remember: there’s only one IPO trade that can lead to guaranteed profits…

Private Market Profits

Instead of buying shares at the IPO, you should be selling them.

In other words, you should get in on these companies before they go public, while they’re still privately held.

Then, once they go public and start trading, that’s when you cash out for a windfall of profits!

That’s how you earn virtually guaranteed gains in the market.

An Example

As just one example, private investors have been buying shares in Uber for years.

Investors like you could have invested in Uber in 2010. That’s when it used the AngelList crowdfunding platform to raise money.

And when Uber goes public, all the investors who already own shares — all the folks who got in when Uber was still private — can finally sell their stakes.

And because Uber was only worth about $4 million when they invested, even if things falls apart — even if Uber’s losses balloon, even if the stock market collapses, etc. — those early investors will still do extremely well.

In fact, even if Uber’s IPO value collapses by 90%, those early private investors will still be sitting on a gain of 3,000x their money…

That’s like turning a $1,000 investment into $3 million.

That is how you make guaranteed profits on an IPO.

How to Truly Profit from the Next Wave of IPOs

So here’s what we recommend:

Unless you’ll be using 2019’s biggest IPOs to sell your private shares, just walk away.

Save your money to invest in a private company that could become the next Uber, the next Airbnb, the next Palantir.

To find early-stage tech companies raising capital, check out our deals page »

Or take a look at the deal roundup email we send you every Monday morning.

Happy Investing.

Best Regards,
Matthew Milner
Matthew Milner


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