An IPO's Qualitative Factors

Certain qualitative factors can affect an IPO's share price beyond its quantitative factors. For example, market perception can assign a higher value to a high-tech company over a solar-panel manufacturing company because investors are more attracted to high-tech. An IPO company can hire well-known and experienced industry personnel to sit on its board of directors, which gives the appearance that the company is led by competent professionals. Be aware that although qualitative factors can increase or decrease the market’s perception of what the stock is worth, the actual quantitative book value remains unchanged. Investors must decide for themselves if the IPO stock is worth purchasing at a market-inflated price.

Metrics for judging a successful IPO process

The following metrics are used for judging the performance of an IPO:

The IPO is considered to be successful if the company’s market capitalization is equal to or greater than the market capitalization of industry competitors within 30 days of the initial public offering. Otherwise, the performance of the IPO is in question.

Market Pricing

The IPO is considered to be successful if the difference between the offering price and the market capitalization of the issuing company 30 days after the IPO is less than 20%. Otherwise, the performance of the IPO is in question.

What is the IPO Process?

The Initial Public Offering IPO Process is where a previously unlisted company sells new or existing securities and offers them to the public for the first time.
Prior to an IPO, a company is considered to be private – with a smaller number of shareholders, limited to accredited investors (like angel investors/venture capitalists and high net worth individuals) and/or early investors (for instance, the founder, family, and friends).
After an IPO, the issuing company becomes a publicly listed company on a recognized stock exchange. Thus, an IPO is also commonly known as “going public”.