IPOs to keep an eye on

10/04/2016 16:26 AST

Many stocks traders are treating IPOs (Initial Public Offering) as a goldmine. The reason for this is simple, when company just starts offering its shares to the public, it is often possible to see the price undervalued. Many investors are interested in getting shares as fast as possible and holding them for a few years, before the price stabilizes or is highly influenced by the market or internal events. Today we are going to take a look at the most promising IPOs of the year 2016 and outline our predictions.

Uber
Everyone talks about Uber. It has even become a little hype as more and more companies want to become an “Uber” of their own niche. If you haven’t heard of Uber yet, it is a company that connects the drivers with the passengers, allowing both of them to benefit from the shared economy. A driver can drive people without licensing and membership fees, while a passenger gets to enjoy a high level of comfort and, usually, lower prices. In simple words, Uber is the world’s largest taxi company that does not own a single taxi.

Is is still questionable whether Uber will flip an IPO this year, yet if it does, it should be the most interesting one. Uber is a company that is growing at the speed of light so same is expected to happen with its stock. The main concern here is the whole legal framework behind Uber’s business model. It is prohibited in some countries and the company’s performance will be strongly be correlated with the legal challenges around it.

Airbnb
Similar to Uber, Airbnb is the largest chain of apartment rentals that does not own a single flat. Operating under the same business model of shared economy Airbnb connects flat owners with the people that are looking for short-term stay and allows both of the parties to benefit. Typically a flat owner receives a great demand for its property while a tourist enjoys lower prices than a regular hotel would offer.

Even though Airbnb is not growing as fast as Uber does, it is a must-watch IPO in 2016. It might be still questionable whether Airbnb is profitable and it is not growing as fast, but the main advantage of this company lays in the legal aspect. So far there have been only a limited amount of legal issues arising from the Airbnb’s operations. Yet its user base have been growing ever since.

Trading IPOs
It is of course possible to open a good old account with one of the stock brokers and start trading the shares with absolutely no leverage. However, some brokers also offer Contracts-for-Differences (CFDs), a derivative instruments that come with overnight fees, but are more suitable for the day traders. Some brokers release CFDs on stocks just a few days after a company has landed an IPO. This is certainly a better asset to choose if you are looking for day trading.

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