IPO stocks 101

Oftentimes, we are treated to media hype about IPO stocks. This usually involves a private company announcing that they are going public, accompanied by potential buyers' almost mad scramble to get a hold of a share of this company's stock. Basically, what happens during an IPO is that the company is now owned by a variety of investors who may or may not have a say on the day-to-day operations of the company. Selling IPO stocks is a way for companies to raise money based on expectations of future profit.
There are a number of reasons why a company would need to raise money. It could be for the purpose of acquiring new equipment or upgrading old ones, an expansion to a new market or a new business venture, it maybe for an exit strategy of the original investors, or just to pay back old debts.
Some companies prefer holding an IPO to raising capital. When the company goes public, media attention and free advertising is almost ensured. A good thing about IPO stocks is that under the rules of the Securities Exchange Commission, the company has to declare its accounting practices, marketing plans and sales figures to the public, promoting honesty and transparency in addition to offering security to prospective investors.
There are costs to selling IPO stocks. There are accounting and legal fees and the printing costs. Costs to mounting an IPO can run into the hundreds of thousands of dollars, lending credence to the saying 'it costs money to raise money'. After the costs come the rules imposed by the SEC. Most companies require experts whose only task is to comply by all the SEC rules for launching an IPO.
If you're looking to invest in IPO stocks, you need to research the company you're planning to buy into. What industry they're in, what markets they cater to and what forces could influence their operation. Whatever you decide, it helps to be prepared for the worst, because a company, no matter what industry it is in can go either way: make you a profit, or make you lose your investment. So it will be up to you to balance your perceived risk and potential profit.
Mel C writes about IPO stocks and gives creating a IPO stock tips.