Recently, I found that many people still have some confusion about the concept of IPO. In fact, IPO means Initial Public Offering, simply put, it is the process of a private company deciding to issue shares to the public and officially list on the stock exchange. When a company reaches a certain stage of development, relying solely on the founders' funds is no longer enough, and at this point, it needs to raise capital through an IPO.

Why do companies go public? Mainly to raise funds to pay off debts, promote business expansion, and also to enhance the company's image. For investors, an IPO opens a window, giving us the opportunity to invest in high-quality private companies that were previously completely inaccessible.

The listing requirements for Hong Kong stocks and U.S. stocks are quite different. The Main Board of Hong Kong stocks has stricter profit requirements, such as a profit of at least HKD 20 million in the most recent year, or a market capitalization of no less than HKD 4 billion at the time of listing and an annual revenue of HKD 500 million. The U.S. stock market is more complex, with different standards for NYSE and NASDAQ. The NYSE requires a cumulative pre-tax profit of at least USD 100 million over the past three years, while NASDAQ's requirements are more flexible, which can be assessed through multiple dimensions such as shareholder equity, market value, and the number of active market makers.

The listing process is also quite complicated. For Hong Kong stocks, it requires appointing sponsors, accountants, lawyers, and other intermediaries, then conducting comprehensive due diligence and audits, and finally submitting applications to the Securities and Futures Commission and the Stock Exchange. The process in the U.S. is similar, needing to find an investment bank as an underwriter, submitting a registration statement to the SEC, conducting roadshows to attract investors, and only then can the stock officially start trading.

Regarding investing in IPO new shares, I think the biggest advantage is being able to buy shares of high-quality companies at relatively low prices. The IPO price is usually a discounted price actively offered by the company. Once you miss this opportunity, the stock price may rise rapidly afterward, making it difficult to get in later. Moreover, most companies choose to launch IPOs when the market is bullish, which means the probability of stock price increase is higher. Additionally, since all investors can only obtain information through the prospectus, large institutional investors do not have much more advantage over retail investors in terms of information.

But risks should not be ignored either. First, be cautious of speculative trading of new stocks. If the chosen company is not a good target in itself, even after listing, when large funds start selling off, retail investors may not be able to follow in time. Second, all positive factors of a company are often already priced into the initial listing price, which may limit short-term gains.

For those who want to participate in IPO investments, the most important thing is to do thorough research. Before investing, it is essential to deeply understand the company's fundamentals and financial situation, and not be tempted solely by short-term gains. Although IPO means raising capital and listing, for investors, it is more of a long-term investment opportunity. Maintaining a cautious and rational attitude, choosing stable companies, diversifying investment risks, and adjusting strategies in a timely manner according to market changes are the correct approach to participating in IPO investments.