A company’s initial public offering, also known as an IPO, marks the first time a company sells its shares to the general public. IPOs are big business, with investment banks handling billions of dollars in stock sales. After an IPO, the company gets a listing on an exchange and anyone can buy or sell its shares.
With the right timing and some good instincts, an IPO can be a great investing opportunity. Take the example of Tesla Motors (NASDAQ: TSLA), the only dedicated electric car manufacturer in the U.S. Tesla has received a lot of publicity for its Roadster, a completely electric performance machine that has zero emissions while going from 0 to 60 mph in less than 4 seconds.
The company completed its IPO on Monday night. This morning, it began trading at $18.61, and by the end of the day it reached almost $24 per share. That’s a gain of 40 percent in a single day.
The tricky part is that Tesla is still pretty experimental and has never actually made a profit on its cars. Nevertheless, the hype, excitement and interest in the company was enough to drive the stock through the roof within less than five hours of trading.
Sometimes, of course, an IPO fails. But if you time your investment correctly, you can make enormous profits. Google (NASDAQ: GOOG) stock debuted at $85 per share – today it’s worth over $450.