What is a Pre-IPO?

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There’s a myriad of ways for growing businesses to raise money in these technologically inclined times. However, one method of acquiring big sums of capital pre-dates even the most primitive computers – Listing company shares on United States stock exchanges.

A company may file for an initial public offering (IPO) when they want to issue stock on open markets in the hopes of generating new enthusiasm from eager investors. These same companies could execute another cash-seeking maneuver by launching a pre-IPO, in which additional investors (usually insiders or institutions) can acquire private shares that will ideally appreciate in value once the IPO goes live.

Can self-directed retirement investors participate in a pre-IPO, or are they forced to wait until after the shares go public and hope they can still get a good deal? The good news is self-directed IRA holders have virtually unfettered abilities to capitalize on pre-IPOs. Some IRA custodians allow investments in publicly traded equities only, thus barring their clients from attempting to harness the earning potential of private equity and pre-IPOs. At New Direction Trust Company, self-directed investors can explore private equity opportunities of all varieties, from pre-IPOs, to private stock, to online equity crowdfunding.

Even if New Direction Trust Company allows these investments, won’t the issuing companies still be more inclined to target big-money insiders as possible investors? Thanks to the technology-based world in which we live, that answer is moving closer to “no” everyday. While some companies limit their offerings only to accredited investors (and their IRAs), others have opened their doors to investors who recognize an upside capacity but don’t yet have six or seven-figure asset sheets.

This is true of pre-IPOs as well as other alternative IRA investments. In a similar fashion to equity crowdfunding platforms, intermediary websites can interact with pre-IPO companies in the hopes of striking an arrangement. If they do, the website will offer positions in the pre-IPO companies to individuals, who can browse the online marketplace and invest in the opportunities they deem suitable. An investor’s IRA is just as eligible as the IRA holder to participate in pre-IPOs in this manner.

While New Direction Trust Company does not recommend or endorse any particular investment avenue, we are proud to offer our clients the ability to direct their retirement as they see fit. For more information about self-directed investing or your alternative investment options, feel free to give us a call at 877-742-1270 or send us an e-mail at info@ndtco.com.