What are the risks of investing in an Initial Public Offering (IPO) or new issue?

Last Updated: 13 Jul 2016

As well as the potential benefits, investing in an IPO or new issue does involve some level of risk. For example:

Volatility risk - This is when the share price goes up and down. This could be due to factors such as changes in the company’s profits or changes in economic conditions. If share prices fell, you would see a change in the market value of your holdings but you wouldn’t actually lose money unless you sold your shares.

Absolute risk - This is the risk that your shares will be worth nothing, for example if the company goes out of business.

It’s important to weigh up the risks before investing in an IPO or new issue. If you have any hesitation at all, then consider carefully if this type of investment is for you.

Interested in online share trading? Find out more at ASB Securities.

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