First Data: How to Buy Pre-IPO Shares Right Now
We’ve talked before about a platform called Loyal3 that lets you buy shares pre-IPO and we’ve found that more times than not, these shares will outperform immediately after the IPO debut. Take the following chart from Renaissance Capital which shows that the average “first day pop” for an IPO in 2015 so far is +16%:
So if you buy pre-IPO shares with the intent to flip them immediately after the first day of trading, does that make you a speculator or an investor? If you have no intent to hold the shares for the long term then you’re a speculator by definition. However, in this case, the likelihood of a positive return exceeds that of a negative return based simply on historical data. Here’s the return realized the first day of trading for all pre-IPOs offered on Loyal3 so far:
In every case so far, you would have realized a positive return by buying pre-IPO shares of any IPO offered on the Loyal3 platform. You don’t have to factor in transaction costs because there are none on Loyal3. All trades are free. We like these odds, so we’re going to participate in the pre-IPO offering announced today by Loyal3 for a company called First Data.
First Data is a company involved in payment processing, and handles about 2,300 transactions per second. With 6 million merchants globally, it has the highest number of merchants in the payment industry and handles 45% of all U.S. credit and debit transaction. The Company was taken private by KKR in 2007, and now they are looking to raise up to $3.6 billion with this IPO which would make it the biggest IPO this year for a U.S. company. The IPO is expected to price on October 14.
In this case though, we’re not overly concerned with what this company does. We’re only interested in trying to realize a quick ROI by buying pre-IPO shares because historically, this strategy has produced positive returns. If you want to buy pre-IPO shares in First Data, you’ll need to act fast because it’s on a first-come, first-served basis. Here are the steps you’ll need to take, starting with opening a Loyal3 account:
You can invest as little as $100 or as much as $10,000. Depending on total demand, you may only get a fraction of your order filled. When we participated in the GoPro IPO, only 15% of our reservation was filled. This means the most you could have purchased in GoPro was $1500 worth if you reserved the $10,000 maximum. We put in a $5,000 reservation for First Data as seen below:
While it looks like an interesting company, we’re just looking for an immediate return following the first day of trading. In order to be completely objective, we plan to put the sell order in the day we receive control of our First Data shares, even if this means selling for a loss.
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