There’s a lot of hype around the Moonpig (LSE: MOON) share price. The company is one of the latest to list on the stock market through an initial public offering (IPO) in 2021.
With all this buzz, should I buy the shares in my portfolio straight after an IPO? Here are four things I reckon investors like me should consider about the Moonpig share price before buying.
#1 – An overview of the IPO
I think I should start with details about the IPO first. The stock went public last week after spending several years as a private company. The Moonpig share price at IPO was 350p, which valued the company at £1.2bn.
Why did Moonpig decide to go public now? During the pandemic, the company saw huge demand for its services. The private investors saw this as a golden opportunity to cash in on their stakes and the IPO was part of their exit strategy.
#2 – Investing at IPO
In my portfolio, I typically don’t buy shares at or straight after an IPO. The reason being is that as a private company, there has been a lack of transparency. Other than the lengthy IPO prospectus, which doesn’t give me much on its past financials, I don’t have much information to go on.
As a public company, I’m glad that there will be regular trading updates. This means that there will be more information to base my research on when analysing the Moonpig share price.
One of the risks with buying at or straight after the IPO is that there could be share price volatility. Until the company reports next, I’d expect some ups and downs in the Moonpig share price until investors can assess the financial position of the company as a public entity. For these reasons, I’d rather monitor the shares for now before buying.
#3 – Moonpig’s business
Let’s consider Moonpig’s business in detail. The company is an online greeting card and gifts retailer. Unlike some of its competitors, it doesn’t have any physical store presence. And online cards and gift orders have increased since Covid-19 struck.
What strikes me about Moonpig is that it’s trying to pitch itself as a tech company. It argues that its proprietary tech platform and apps use data science to personalise customer experience. That might be true, but I still see Moonpig as a card and gifts retailer that happens to use tech to sell only online.
The company operates under Moonpig in the UK and the Greetz brand in the Netherlands. I like that it’s a clear online leader in both markets, which should be positive for the Moonpig share price. According to its IPO prospectus, Moonpig holds a 60% and 65% market share among online card specialists in the UK and Netherlands respectively .
#4 – Competition could impact the Moonpig share price
While revenue may be increasing, the competition is fierce and is increasing. This could have a negative impact on the Moonpig share price. The company has stated that competitors are now transitioning online away from the traditional bricks and mortar stores.
Sending gifts and cards are ingrained in society. Only time will tell if Moonpig’s tech platform and apps will lure customers in. For now, I will continue to monitor the Moonpig share price until it has released further trading information as a public company.
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.
The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.
But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.
Nadia Yaqub has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.