In recent years, the term ‘sub IPO’ has become increasingly popular, referring to the issuance of stocks by a company that have been listed for less than a year. Compared to blue chip stocks, the risks and opportunities of secondary new stocks are more obvious. So, why don’t many people recommend investing in sub new stocks? This article will explore the risks and drawbacks of sub IPO.
Firstly, there is a high listing risk associated with secondary new shares. Most new shares require a period of “adjustment period” after being listed (the IPO management committee considers the first trading day to the last month as the adjustment period), during which the price of the stock may experience rapid fluctuations and increase uncertainty in the company’s operating situation. At the same time, due to the high expectations of the market for its overall performance, it will be influenced by a certain amount of internet attention and attention heat. Sometimes, the operation of “buying at low prices and shipping at high prices” can cause significant fluctuations in stock prices.
Secondly, the liquidity of secondary new stocks is usually low. In the early stages of a company’s listing, the degree of equity dispersion is relatively high, and the number of institutions or individuals holding shares is relatively small, which leads to low transaction volume. If you want to sell such secondary stocks, you are likely to find that the trading volume is too low, leading to poor sales, and the risk and cost of giving up may become more apparent.
In addition, there are also audit quality issues with secondary new shares. Compared to mature companies, newly established companies often have significant problems in financial statements and internal control, and their financial statements also have certain errors. Investors often face the risk of investing funds and time in the stocks of a company with poor audit quality.
In addition, most newly listed companies do not have past data to provide investors with a basic reference. Stock prices are often influenced by institutional speculation or social media marketing, which requires more careful evaluation and reflection. Potential risks are difficult to obtain directly through open channels, and there are often situations of information asymmetry.
In summary, although some companies can surpass the shadow of the main board market giants in the performance of sub new stocks, they are still a high-risk investment variety. Only when companies with standardized, stable market value, and strong strength grow to a sufficient scale can they smoothly go public and achieve very good inclusivity for a certain period of time. Therefore, it is recommended that investors fully understand the financial situation, internal control, audit quality, liquidity and other factors of the enterprise before investing, in order to avoid unnecessary risks.