We have discussed the term IPO in the previous article. IPO can be your next investment choice if you can invest in IPO with the right strategy. In the following article, we will briefly talk about investing in IPO and its Shariah perspective.
Things to Consider Before Investing in IPO
1. Look at company’s portfolio
The first step you should take before investing in IPOs is to check the company’s background and profile. They are crucial to understanding the company’s growth potential in the future. As an investor, you should check the company’s history and analyse its recent performance.
2. Beware of the oversubscription
It would be best to keep in mind that the company could offer a limited number of shares during IPO. The allocation of the shares will be pre-agreed. There might be a case where the number of applicants for IPO will be more than the number of existing shares offered.
3. Be aware of hype
If your objective from investing in IPO is making a big profit, as you are investing ahead of everyone, you need to reassess your goals. Consider looking at the stock market positioning.
4. Read the prospectus carefully
The prospectus gives complete information about IPO. When it comes to IPOs, it is more difficult to find the information available compared to companies with years of data. To maximize the information, start with reading the prospectus. The prospectus contains information that summarises the risks and opportunities of the company. It will also provide information on the company’s plans for the proceeds from the IPO.
4 Steps of Investing in IPOs
- Establish an online connection with a broker offering IPO stocks
- Meet eligibility requirements
- Request shares
- Place an order
Is It Halal to Invest in IPOs?
The answer is yes! It is totally Shariah-compliant to invest in IPOs if their stocks are halal. Before investing, ensure that the business activities and finances of the company are halal. You can check the Shariah-compliant status of the stocks at Musaffa Halal Stock Screener.
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