How IPOs work and why you shouldn't buy a company on its first public day

An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors. In order to submit it, companies must meet requirements by exchanges and the SEC (if the company is US-based). 🗃️
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Prior to an IPO, a company is considered private. As a private company, the business has grown with a relatively small number of shareholders including early investors like the founders, family, and friends along with professional investors such as venture capitalists or angel investors. 💼
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Statistically it's probably a bad idea to invest in the IPO day, in fact more than 60% of 7,000 IPOs from 1975 to 2011 had negative absolute returns after 5 years in the secondary market, according to a UBS analysis. More recently from 2000 to 2016, the six-month absolute return has been negative. 📊