IPOs - Speak The Basics (Very Good Reading) (18)

"Going concern" statement --


If a company's accountant says that the firm's business results raise "substantial doubt about the firm's ability to continue as a going concern," watch out.

It usually means that a company needs the IPO pretty badly to continue paying off its obligations.

Many companies avoid getting plagued with this scarlet letter by raising money immediately prior to the IPO.

Found in "Report of Independent Auditors."



Play the game


Many investors fret they'll miss the next big thing because they have no access to the IPO market,

but study after study has proven that IPOs historically underperform the broader markets.

This fact should come as no surprise considering that new issues are high-risk, high-reward investments.

Pick the right stock and you could score big, but the more likely scenario is that your hot IPO will be languishing below its offering price in a few years.

This series of IPO Basics includes a definitions of terms found on financial statements, covers the basic definitions needed to understand the IPO process, and looks at the prospectus.