There's a two-step process for retail investors to have a shot at making money on hot IPOs after the big institutions have taken a crack at the first batch of shares.
Here are two great steps to take for the Uber and Pinterest IPOs soon to come in 2019, according to TD Ameritrade Trading Manager Shawn Cruz.
Be patient. "It's not to say that the time [the IPO] comes into the market, that's it," Cruz said, giving the example of Facebook's (FB) - Get Report 2012 IPO, in which the stock rose upon issuance and then fell considerably. "If you were an investor and you were patient, you used that as an opportunity to come in and get access to those shares below the actual IPO price," Cruz said. In Lyft's case, shared spiked to $87 in the opening trade, only to eventually fall below its offer price (it now trades for under $68). But the drop may have been an attractive entry point for some investors.
Know your risk tolerance, and have a maximum price you're willing to buy at. "Make sure you're managing risk and deploying your capital effectively," Cruz said. "Making sure you have a good idea of what price you're willing to pay and what your outlook is for the company" is key for any investor.
And don't be afraid to wait until all the dust settles and wait for the options market to open up. Options can be a nice way to secure an implied long or short position, without taking too much risk, Cruz noted.
Interestingly, Lyft is threatening to sue Morgan Stanley (MS) - Get Report for allegedly facilitating short selling by investors otherwise limited by lock-up provisions. And speaking of those big banks, Goldman Sachs, RealMoney's stock of the day, (GS) - Get Report will send executives to Capitol Hill Wednesday to talk to Congress.