With shares vaulting over 70% on the first day of trading, Yelp Inc. (NYSE: YELP) is the latest company to successfully launch its initial public offering after a prolonged dry spell in the new offerings space. Investors may also gain exposure to new offerings through IPO-related ETFs.
Yelp’s shares jumped as much as 73% on its first day of trading, generating $107.3 million in the IPO, according to Bloomberg.
However, new IPOs don’t immediately enter the ETFs. For example, the tracking index for First Trust IPOX-100 (NYSEArca: FPX) screens stocks, and IPOs are only able to enter the benchmark on the close of the sixth trading day, according to the ETF’s prospectus.
An IPO is an offering to the public to purchase shares of a company usually in an attempt to raise more capital. By getting in first, investors can be well situated at the start of a potentially uprising company. [Facebook and the IPO ETFs]
During the initial stages of an IPO, the stocks can experience high volatility. Instead, investors can gain access to a basket of new IPO offerings through ETFs. The ETF basket helps mitigate the potentially large swings, or initial “pop,” within IPO space. [IPO ETF Sidesteps Pandora Flop]
IPO ETFs include:
- ETRACS Next Generation Internet ETN (NYSEArca: EIPO) includes Internet companies that have been publicly traded for less than three years.
- First Trust IPOX-100 (NYSEArca: FPX) tries to reflect the performance of U.S. IPOs over the first 1000 trading days.
First Trust IPOX-100Index Fund ETF
For more information on initial public offerings in ETFs, visit our IPOs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.