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Can you prevent fraud while investing in an IPO?

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Many people invest money into companies they believe will produce a profit. While you may be part of a group of angel investors, you might also choose to invest on your own. But regardless, you ought to protect your interests in the process.

Through an initial public offering (IPO), you can purchase stock in a company as they “go public.” And while numerous multibillion-dollar IPOs are on the horizon for 2019, do you know how to minimize your risks while investing?

Things you can to protect your interests

Before investing in an IPO, be sure to read the company’s prospectus to educate yourself about how the company intends to use the money raised. This can also make you aware of the potential risks involved with investing.

You may be wise to research a company’s competitors as well as the company you intend to invest in, especially with seemingly similar companies, such as Lyft and Uber, going public around the same time. And you can educate yourself by searching online for press releases, looking into past financing rounds and exploring the overall health of the industry.

If you are in a position to invest, you may be interested in learning about how to protect yourself by looking at some of your options. In addition to Uber and Lyft, some of this year’s IPOs include:

  • Slack
  • Airbnb
  • Instacart
  • Pinterest

If you are unfamiliar with a company, you can also verify an IPO’s legitimacy through the Securities and Exchange Commission (SEC) filings prior to investing.

Do your research to protect yourself from fraud

While a company must provide transparency and comply with SEC guidelines, remember that you are putting your money on the line by investing. And while you may get a substantial return on investment (ROI), you may be able to prevent IPO fraud by doing your due diligence and proceeding with caution.