When should I sell my IPO shares?

When should I sell my IPO shares?

If you see that there is a high premium that others are willing to pay for your IPO shares, you may want to sell them as soon as possible, or you may feel that you got a reasonable price and are more willing to hold the shares for a long time because you believe in the long-term growth potential of the company.

If there is a lot of hype surrounding the IPO, and share prices are driven upward in the following weeks, it may be a good strategy to immediately sell them while the frenzy is on. After the Lock-up Period of 90 -120 days, the insiders and investment bankers who were required to hold onto their shares may start to sell theirs off, and in some cases, this can cause a significant price drop as they flood the market.

Since the company issuing the IPO does not have a public record of their books from the preceding years, many analysts and investors will feel like they are flying blind, without the performance of previous years to gauge the current performance against.

For this reason, many investors and advisors will avoid new issues until they have been on the market for about 3 years. In the meantime, there is not much information with which to find trading signals.

However, if you have a strong belief in the company, you can hold your shares as long as you want, but you may have been better off buying your shares after the IPO hype had fizzled to some degree.