When LinkedIn (NASDAQ: LNKD) hit the market last week, it delivered a quick doubler to the lucky stiffs who were part of the initial public offering.
Unfortunately, regular investors like you and me were left out of the party.
That’s the cold reality of IPOs. Unless you know someone at the company itself or have a great investing network with bigwigs on speed dial, you’ll have a hard time sharing in the initial splash of companies like LinkedIn.
It’s a fact that doesn’t bother investors most of the time, but social networker LinkedIn opened 80% over its offer price of $45and topped out at $115 a share hours later, it’s hard not to take notice – and to wonder how we can share in the action next time around.
The good news is that even if you can’t share in the pure IPO of a stock, there are still options out there. Yes, Some of them take a big bank account — but others allow even small-time investors to share at least in part in the public offerings of the hottest stocks.
If you were salivating over LinkedIn and are even more excited over the prospect of an inevitable Facebook IPO, here are five options you may do well to consider:
Buy from Investment Bankers: In an IPO, a company hires financial advisers to structure the transaction – and if you go right to these money-runners, you can get in on the stock offering. These gatekeepers are plainly listed in an IPO prospectus, publicly available on the Securities and Exchange Commission EDGAR database. For instance, LinkedIn’s investment banks included Morgan Stanley, Merrill Lynch and JPMorgan. Unfortunately, these investment bankers won’t give you the time of day unless you make it worth their while with a serious chunk of cash. What’s more, even if you can come up with a few hundred grand, it’s an awfully risky bet to dump that chunk of change into a single company. Disclaimers aside however, in the case of LinkedIn anyone who dumped their entire nest egg into this IPO would have made the investment of a lifetime.
Buy On Secondary Markets: Over the past few years, new markets like SharesPost and Second Market have emerged to trade private company shares. And after some difficulties with Facebook and the current cap of 500 private shares according to SEC rules, there has been a recent push to ease regulations and make this market even more accessible. You could have bought LinkedIn shares on just this kind of exchange prior to the IPO. But the catch is, again, money. You’ll probably have to have north of $100,000 considering the small supply of these shares. There’s also a time element because of the legal hurdles and regulations involved with such a private stock investment. So if you want to get into Facebook or another hot IPO beforehand on the secondary market, you better start doing your homework sooner rather than later.