What is a Pre-IPO Stock?

A pre-IPO stock is a type of investment that you can buy before a company goes public. Companies and venture capital firms often sell these stocks to raise money.

What is a Pre-IPO Stock?

A pre-IPO stock is issued by a private company before its public offering. It doesn’t have to follow the same rules for sharing information as public companies, so investors may not know everything about the company.

Investors buy pre-IPO stock shares in addition to those available during the IPO. These shares usually cost more because there are fewer of them, and buyers are willing to pay extra.

Private Companies and Private Securities

Private companies can sell securities directly to investors, which isn’t done on public exchanges. This is called private placement, and it can involve accredited or non-accredited investors.

Accredited investors typically have a net worth of over $1 million or earn high incomes. Non-accredited investors do not meet these criteria and usually invest through crowdfunding platforms.

IPO vs. Pre-IPO Stocks

When you buy a pre-IPO stock, you’re investing in a company that hasn’t gone public yet. An IPO is when a company first sells its stock to the public, while pre-IPOs are the shares that are sold before that.

Investing early can be appealing, but it comes with risks. However, if the company succeeds, there could be significant rewards.

Risks of Investing in a Pre-IPO Company

Investing in pre-IPO companies is risky because their value is hard to assess. There may not be clear data on their performance, making it difficult for investors to decide if the stock price is fair. Additionally, buying private securities can carry extra risks compared to public ones.

SoFi explains that expressing interest in a pre-IPO stock is like making a reservation; you’ll be contacted once the deal is confirmed.

While investing in pre-IPO stocks has risks, it also has potential rewards. If you choose to invest, watch for news about an upcoming IPO or acquisition.