Buy or sell what3words stock pre IPO via an EquityZen fund | EquityZen (2024)

FAQs

Is EquityZen a legitimate company? ›

Is EquityZen legit? EquityZen is a legitimate investment company that focuses on alternative investment options. It works with accredited investors to find private stock in pre-IPO companies.

Pre-IPO investing offers potential high returns by investing in private companies before they go public. However, it also carries risks such as illiquidity, difficulty in picking winners, and loss of capital.

Value for Money Investment

When you invest in a pre-IPO stock, you get to invest in company shares at a portion of its market value. This gives you a higher return than your investment. Even though IPOs may seem like a cheaper option as they offer rock-bottom prices, but they hold the risk of post-IPO corrections.

Everyone can invest in the pre-IPO phase by choosing the correct company and observing the growth trend of the company. By dematerialising its shares, a firm can now sell them to anyone and make it simple for them to be transferred from one Demat account to another.

Pre-IPO stocks are less risky investments

In short, there's less risk when you don't have a public stock offering for investors to dump their shares. This means that when you invest in pre-IPO companies, your ROI will be higher compared to post-IPO stocks.

Pre-IPO Private Stock

Pre-IPO private company stock exchanges are essentially venture capital markets for the masses. An employee who holds stock in a pre-IPO private company can list shares for sale on such an exchange.

Pre IPO investing has its share of risks such as illiquidity, difficulty in choosing the right companies, and losing the whole capital invested. Nevertheless, entering into the investors list of a company before the Initial Public Offering (IPO) can also give investors tremendous returns if entered at the right time.

Risks of investing in pre-IPO stock

This may include the possibility that you could or might not be given any shares. Many investors may not receive any shares if an IPO is oversubscribed. Alternatively, you can receive fewer shares than you requested.

Potential loss of investment

As with virtually all investments, investments in pre-IPO stocks carry the risk of decreasing significantly or going to zero, such that an investor not only fails to make a return on the investment, but actually loses some or all of the money originally invested.

Deciding when to sell

The IPO is a bit of a hurry-up-and-wait, as employees usually can't sell their stock for up to 180 days. This is called a lock-up period, and is meant to prevent employees from all dumping their stock and depressing the stock price.

How long do you have to hold pre-IPO shares? ›

The initial public offering, also known as the IPO lockup period, is a signed restriction that prevents shareholders of a company from selling the stock before the company goes public. This period can vary, and it is usually happening anywhere from 90 days to 180 days from the day of the IPO.

However, you need to pay special attention to the pre-market session to decide whether to sell on listing day or not, as it gives a reasonable estimate of where to stock is headed. For instance, if a pre-market session has a return of 70-80%, then it's a good decision to sell on the day of listing.

A pre-IPO placement is a sale of large blocks of stock in a company in advance of its listing on a public exchange. The purchaser gets the shares at a discount from the IPO price. For the company, the placement is a way to raise funds and offset the risk that the IPO will not be as successful as hoped.

Investing in pre-IPO stock can be a strategic way to build wealth in the long term. If you manage to invest in the right company at the right time, you can get tremendous returns on your investment. There are risks in pre-IPO investing – as is the case with any other investment – but the upsides can be tremendous.

The value of your pre-IPO stocks is likely determined by the most recent assessment of your company's fair value, rather than by a fair market price as with publicly traded shares.

Only consider early exercise if you're a very early employee. Otherwise, the best time to exercise is when your company begins the process of going public. If your company is already public, only exercise if the exercise price is below the fair market value of the shares.

No, the success of an IPO bid solely depends on random allocation of shares being done by the company. Pre-apply ensures your order is placed with the exchange. Was the answer helpful?

The firm works exclusively with companies that have already raised capital from large, institutional investors. Companies need to have at least $50 million in enterprise value to be listed on the marketplace. The minimum investment amount for investors is $20,000.

Certain requirements must be fulfilled to go public. These include having a minimum of seven shareholders, minimum share capital of Rs 500,000, and at least 3 years of profit.

How much equity do you give an IPO? ›

In my experience it's reasonable to be handing over anything from 10% to 25% per investment round, in an IPO it can be 30% to 50%. As long as it's less than 25% in each capital raise round you should not be too concerned.

No assurance of allotment of shares

Even if you apply for an IPO, there is no guarantee that you will be allotted shares. This happens in the case of oversubscription of an offer. Over-subscription is when the demand for a new public issue of shares is greater than the number of total shares offered.

Moreover, a company taking the IPO route is most likely to be exposed to risks such as dissatisfied shareholders, confidentiality and trade secret concerns, insider trading by the directors, new stakeholders constantly judging the company's performance, amongst others.

There are a number of reasons why an IPO may fail but it often comes down to lack of planning or unrealistic expectations on the part of the company executives or their underwriting team. An overvalued IPO, for example, or a company that has shaky financials, could end up underwhelming investors once trading opens.

The underwriter's compensation is the difference between the price the underwriter pays for the shares and the price it gets when it resells them. In this case, the underwriters bear the entire risk of selling the stock issue.

Restrictions to sell: IPO shares come in within a mandatory lock-in period for six months from the day of allotment.

Why does it take 3 days for stocks to settle? After you trade a stock ownership of that share transfers, however, the shares themselves will not transfer until 3 days later. This is due to the SECs 3-day settlement rule or T+3 Settlement Cycle.

Generally, yes. If you are an investor who buys shares in the open market on the day of the IPO, then you can buy and sell at will. However, if you participated in the IPO itself and received shares at the IPO price before the first day of trading, you would be subject to the lock-up period for those shares.

If you are looking to buy a stock on the day of its IPO, do so because you expect to invest for a long term because, in the short term, it might not turn as much profit as you hope it would. If it's a good company, in the long term, you can be certain of a decent profit.

Is it best to buy at IPO or wait? ›

You shouldn't invest in an IPO just because the company is garnering positive attention. Extreme valuations may imply that the risk and reward of the investment is not favorable at the current price levels. Investors should keep in mind a company issuing an IPO lacks a proven track record of operating publicly.

If the team managing the IPO is well organized, then it will typically take six to nine months for the company to complete its public debut. The transition from private to public is a demanding process and incurs a lot of expenses for the issuing company.

If the company does prosper, the long-term advantages include the sharing of business profits – and between a much smaller team than a regular business. This could mean a rapid increase in salary, promotion to a more senior position, or the option to invest within the company at a much more desirable rate.

One major disadvantage of an IPO is founders may lose control of their company. While there are ways to ensure founders retain the majority of the decision-making power in the company, once a company is public, the leadership needs to keep the public happy, even if other shareholders do not have voting power.

EquityZen was founded in 2013 by Atish Davda (CEO), Shriram Bhashyam, and Phil Haslett in New York City.

Atish Davda - CEO, Founder - EquityZen | LinkedIn.

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EquityZen is the pre-IPO marketplace for selling your private shares.

What is the holding period for EquityZen? ›

Shares that are the subject of investment through EquityZen are generally subject to a lock-up period of up to 180 days after the effectiveness of a company's IPO filing, during which time shareholders are restricted from selling their shares.

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Invest in or value your shares in one or many pre-IPO companies through an EquityZen investment vehicle.

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As of October 2021, the underwriters of the largest IPOs in the United States were Goldman Sachs, Credit Suisse, and JP Morgan – the combined value of their underwritten IPOs reaching almost 70 billion U.S. dollars.