Investor Education

Investing in an IPO can be both exciting and risky. Before buying into a newly public company, it’s essential to review its prospectus—officially known as the S-1 filing in the United States. This legal document, filed with the Securities and Exchange Commission (SEC), contains everything an investor needs to make an informed decision. But with dozens (sometimes hundreds) of pages filled with jargon, where do you start?

In this guide, we’ll break down how to read an IPO prospectus like a pro, helping you identify critical sections, assess financials, and spot red flags.

Initial Public Offerings (IPOs) can offer exciting opportunities to invest early in companies transitioning to public markets. However, evaluating an IPO requires a disciplined and strategic approach. With companies often presenting a best-case scenario in their prospectus, investors need to know what to look for — and what to question. This guide explores the key factors to evaluate before investing in any IPO.

Understand the Company’s Business Model

Before investing, ask: What does the company do? How does it make money? Is the business model scalable? A company with a clear, understandable, and proven business model is generally a safer investment than one relying on unproven concepts or future technologies that are still in development.