Well, well, well…this crash-course to investing self-edification journey keeps throwing new things at me.
Last week, I received a super interesting notification from Robinhood about an upcoming IPO. In case you don’t think that’s interesting, let me remind you that this blog is by a newbie investor for others like me. I know what an IPO is, but I have NO IDEA how participating in an IPO actually works! Like, how do you know what to do, when, how much?
What I know: an IPO is the initial time a private company sells stock to the public. This is done to raise funds, right? Maybe for expansion, maybe it’s for founders and private investors to get rich. That is literally ALL I KNEW. I also knew an IPO can be a really good opportunity to get in on a chance to buy stock that COULD increase in value substantially. (Again, I say “could,” because this is, after all, white-collar gambling.)
I knew the brand: Allbirds. They make sustainable, recycle-y shoes that are cute and hip. (They make other things, too, which I did NOT know until I researched them.)
My knowledge base was tremendously lacking, but I wanted to know more. I’d never looked deeply into it before, because it had never applied to me and my debt-ridden life.
I’m on a learning trajectory now.
The intriguing message in my Robinhood messages (which I don’t even read, haha, because I still think like a broke person who ignores ads and “special offers”):
Allbirds, Inc. (BIRD) plans to go public.
Oh wowwww, I even knew who they were. Is sustainable investing…um, sustainable?? Would this be something that would increase in value? Could I hit it on this? Yikes, kinda exciting.
Learning more wouldn’t hurt. In the interest of time (I’ve been time-challenged this week), I only went to Investopedia.com https://www.investopedia.com/terms/i/ipo.asp
In a nutshell way too small to properly convey the vast content available on IPOs, I will say just this: When a company wants to go public, they work with underwriters to do all the hairy, nitty-gritty, legalese work to properly prepare documents, offering price, amount of shares, filing, issuance, and much more. After the shares are issued, the funds received is recorded as shareholders’ equity on the company’s balance sheet. Underwriters usually set the price of the IPO according to “net present value of the company’s expected future cash flows” (betting!?!). Investors look at the company’s prospectus for better insight on the bet.
The new term I learned here was “Lock-Up.” I think this is important, and if you are interested in this topic, dear reader, start with the link above. During an IPO, underwriters make company insiders sign a “Lock-Up” agreement, which locks them in to keeping the stock for a specified length of time. When that time, maybe 3 months or even much longer, is up, many of the insiders try to sell at once to cash in. This drives the stock price way down.
So, my question is, when should I sell?
I queued in to take part in this, agreeing to a max of $16 per share. On the day of the IPO, I was part of the group who was able to partake (and this presented questions, like, really? Not everyone gets to purchase?), and I was automatically in for 3 shares @ $15.
The risk: $45. I’m insane in the membrane, yes. I know that in the past, even this amount of money was simply not possible to allocate to this. It’s not food, it’s not kids’ clothes, and sometimes not spending $20 made the difference between a bill getting paid or not. I’m thankful to be in a better position.
I checked my Robinhood account later that day. DANG! The value DOUBLED! I was astounded! This was so exciting. I had never personally been part of any action like this! Over 100% increase in value; are all IPO’s like this? I wondered what the catch was.
It started to decline, not a shock, but I did wonder how low it could tumble. Like, could I lose all of the money I put in? (It is, after all, a bet.) I held tight, mainly because I’m curious. As long as I don’t lose more than what I put it, it’s all part of the self-education price tag, which will hopefully prepare me for bigger bets with bigger returns.
I found this info from The Motley Fool’s website on why BIRDS declined, which was helpful in understanding the whole IPO concept, basically the price fluctuations were just the market determining how much these shares should be worth, and it might not be done. https://www.fool.com/investing/2021/11/04/why-allbirds-stock-fell-152-on-thursday/
Currently, my 3 shares of Allbirds (BIRDS) IPO adventure has experienced a net gain of 74.0%!!!! That’s $33.30 I made on $45. Gosh, what if I had lots of money to bet…would I, though? Haha. That’s the thing, when does my brain believe this is possible with more money, after being so careful and sometimes without enough money? I’m still down a wedding and engagement ring, after selling them to pay basic utility bills a few years ago. (I don’t want them back, btw.)
All of my little newbie investing combined has shown a gain of 17.6% since I began at the end of September. I feel like I’m stuck in a pattern of adding $50 at a time to my Robinhood account, but I have yet to sell or take money out. (I won’t be taking money out.) When do I sell? I have a fear of missing out…FOMO!!!!!…like, what if I get rid of something, and then it goes up in value.
I think if the OATLY comes above or at what I paid for it, I will sell. (or if it goes below $13/share again.)
About my Nintendo baby!! I’ve been hoping for the best, and I think it will bounce back and improve by Christmas!!!! I know, I’m down 7.29%, or $4.35, but it’s on the upswing!! I just know it.
I feel like I’m supposed to sell my BIRDS, since it’s an IPO and I don’t know much about the fluctuations of a sustainable shoe company IPO. I mean, I’m not supposed to just be slipping $50 into this adventure all the time, am I? And then what? I know this is small scale, so I’m going to switch up my mental energy and pretend there are two zeros behind everything and act accordingly. TBD.