Financial Topics Archives | Page 482 of 807

Q: What Is an IPO Lock-up Period?

The IPO lock-up period is the length of time after a company goes public, during which some early employees or investors in the company aren’t allowed to sell their shares.

Q: What Is the Purpose of a Lock-up Period?

Ensuring share-price stability, avoiding insider trading, and maintain a good public image.

Sep

2023

Navigating the IPO Lock-up Period

By Inyoung Hwang | Growing Wealth, invest, Investing | No Comments

Following an initial public offering, or IPO, many companies and investment bankers will tie your stock up in a lock-up period to stop you from cashing out too quickly and help keep the share price steady.

That may be frustrating if you’re an early employee and investor in a company that’s about to go public, as you may be expecting the value of your stock to skyrocket after the initial public offering, and were hoping to sell some shares. But lock-up periods serve a purpose, and stakeholders will need to know how to navigate them.

Key Points

• An IPO lock-up period is a period after a company goes public during which some early employees and investors aren’t allowed to sell their shares.

• Companies or investment banks self-impose the lock-up period contractually, usually lasting between 90 and 180 days.

• The purpose of the lock-up period is to stop early investors from cashing out too quickly and maintain a steady share price.

• Companies may also use the lock-up period to avoid flooding the market with shares and to prevent insider trading.

• Regular investors may want to pay attention to the lock-up period when investing in IPOs, as it can affect the risk of investing in the company.

What Is an IPO Lock-up Period?

As a part of the IPO process, the IPO lock-up period is the length of time after a company goes public, during which some early employees or investors in the company aren’t allowed to sell their shares.

These restrictions are not mandated by the Securities and Exchange Commission (SEC), but rather are self-imposed contractually by companies or the investment banks that were hired to advise and manage the IPO process.

Lock-periods can be any length of time, but usually they’re between 90 and 180 days after the IPO. Companies may also decide to have multiple lock-up periods that end on different dates and allow different groups of people to sell their shares at different times.

How the IPO Lock-Up Period Works

Here’s an example of an IPO lock-up period: When one lock-up period ends company executives might be allowed to sell their shares, while a subsequent lock-up ending means regular employees can sell their shares.

What Does “Going Public” Mean?

When a company has an IPO, it is offering shares of the company for sale to the public stock market for the first time. The company is shifting at this point from a privately held company to a publicly traded company. This is the origin of the phrase “going public,” which you may have heard bandied around in reference to IPOs.

When a company is private, ownership is limited and can be tightly controlled. But when a company goes public, anyone can buy shares. But at this point there may be a lot of fingers in the pie already. Company founders, early employees, and even venture capitalists may already own shares or have stock options in the company.

💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

What Is IPO Underwriting?

Before a company goes public it often goes through an underwriting process in which an underwriter — usually an investment bank — advises the IPO process and helps come up with the business’ valuation. The most common way they do this is by agreeing to buy a company’s entire inventory of stock.

Then to alleviate the risk of holding all of this stock, the underwriter will allocate shares of the company to institutional investors before the IPO.

The underwriter will try to drum up so much interest in the stock that more people will want it than there are shares available. This will lead to the stock being oversubscribed, which will hopefully support its price when it hits the market.

Recommended: What Sets IPO Valuations

How IPO Lock-ups Get Used

A company or its underwriters might use the lock-up period as another tool to bolster the share price during the IPO.

Shares held by the investment bank or institutional investors can be sold during an initial public offering, but the shares held by company insiders — including founders, executives, employees, and venture capitalists — may be subject to a lock-up period.

With Silicon Valley tech startups in particular, a greater proportion of compensation may be paid out with equity options or restricted trading units. In order to avoid flooding the market with shares when employees exercise these contracts, the lock-ups restrictions mean that these shareholders are not able to sell their stock until this period is over.

Recommended: Guide to Tech IPOs

What Is the Purpose of a Lock-up Period?

Ensuring Share-Price Stability

Insiders, like employees and angel investors, can potentially own far more shares in a company than are initially available to the general public. The last thing a company wants during an IPO is to have these extra shares flood the market.

Since share price is set by supply and demand, extra shares can drive down the price of the stock. And that’s not a good look, especially when a company is trying to impress investors and raise capital.

Avoiding Insider Trading

Company insiders may face other restrictions beyond the lock-up period. That’s because they might have information that can help them predict how their own stock might do that is not available to the general public.

Though insider trading can be legal if properly controlled and documented, it is not legal when based on information the public doesn’t have yet. So, depending on when a lock-up period ends, company insiders may have to wait extra time before selling their shares.

For example, if a company is about to report its earnings around the same time a lock-up period is set to end, insiders may have to wait for that information to be public before they can sell any shares.

Public Image

Finally, lock-up periods can be a way for companies to keep up appearances. When those closest to the company hold their shares, it can signal to investors that they have confidence in the strength of the company.

If company insiders start to dump their stock, investors may get suspicious and be tempted to sell their shares as well. As demand falls, the price of the stock usually does, too.

Even if the insiders were trying to cash in their stocks for no other reason than simply wanting the money, public perceptions may change and damage the company’s reputation. The lock-up period may have an effect by keeping this from happening — at least while the newly public company gets off its feet.

💡 Quick Tip: Keen to invest in an initial public offering, or IPO? Be sure to check with your brokerage about what’s required. Typically IPO stock is available only to eligible investors.

What’s an Example of a Lock-up Period?

For example, let’s say Business X — a unicorn company — went public with an IPO in March 2022. The company used a system of multiple lock-ups with different expiration dates. The first lock-up expired in July 2022, and allowed early investors and insiders to sell up to 400 million shares of the company.

As new shares hit the market the stock dropped by as much as 5%, and it closed the day down just over 1%. A second lock-up expired in August 2022, allowing regular employees to sell their pre-IPO shares in the company. When this lock-up ended, employees were allowed to sell more than 780 million shares of Business X on the open market.

What Does the Lock-up Period Mean for Employees with Stock Options?

Restrictions imposed during a lock-up period usually apply to any stock options someone has been given as an employee before an IPO. Stock options are essentially an agreement with a company that allows its employees to buy stock in the company at a predetermined price.

The thinking behind this type of compensation is that the company is trying to align employees’ incentives with its own. Theoretically, by giving employees stock options, the employees will have an interest in seeing the company do well and increase in value.

There’s usually a vesting period before employees can exercise their stock options, during which the value of the stock can increase. At the end of the vesting period, employees are able to exercise their options, sell the stock, and keep the profits.

It’s possible that the company will issue stock options before it goes public. If stock options vest before the IPO, employees may have to wait until after the lock-up period to exercise their options. However, stocks may not vest until after the lock-up period, in which case the restrictions don’t have much bearing on the employee’s ability to exercise their stock options.

How Does the IPO Lock-Up Period Affect Investors?

When buying IPO stocks as a regular investor, you likely don’t have access to shares of a company before it goes public. Even so, you still might want to pay attention to the lock-up period. Investing in IPOs can be tricky and are generally considered risky.

The underwriters will probably do everything they can to make sure that stock prices go up when company shares hit the market. But in the end, no one really knows what will happen during an IPO.

Reading the IPO Prospectus

What’s more, investors interested in buying a stock that’s about to go public don’t really have much information to go on to help them figure out what kind of value they’re getting. When they’re private, companies don’t have to divulge very much information about their inner workings to the SEC.

However, before going public they will make documents available, including the Form S-1 and the red herring prospectus that can give investors some clues about a company’s business model and what they plan to do with the money they raise. Investors can also look at what happened when similar companies went public and whether they did well.

Waiting to Buy Until After Lock-ups End

This is all to say that with little idea of what a company’s stock will do when the company goes public, regular investors may want to hold off before they invest. Investors may even want to hold off until the lock-up period is over.

When the lock-up ends and insiders and employees can finally sell their shares, the stock price may experience some volatility as the new shares enter the market, potentially causing drops in a stock’s price.

Some investors may try to take advantage of the dip that can occur when a lock-up period ends. For example, if investors see that a company’s financial health is good during the first stages of its public life, they may use the expiration of the lock-up period as a chance to buy shares at a “discount.”

They may feel that if the stock’s fundamentals were good before the lock-up ended, the company is in good financial health and the stock should rebound. Timing the market, however, isn’t necessarily a good idea for all investors, especially those not used to taking a deep dive into the fundamentals of a company’s financials. It’s also not guaranteed to produce good results.

The Takeaway

Lock-up periods are agreed-upon periods between early investors and employees of a company and underwriting investment bankers during which selling of shares is prohibited. Having such stakeholders hold off on selling their shares can help the stock price of a newly public company stay more stable.

An initial public offering’s lock-up period can be hard to navigate. Yet, they can be really exciting for investors looking to get in on the ground floor and employees or insiders looking to cash in on their shares or stock options.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.

New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SOIN0523116

Sep

2023

What is an IPO Underwriter? What Do Underwriters Do?

What Is an IPO Underwriter and What Do They Do?

By Colin Dodds | Growing Wealth, invest, Investing | Comments Off

An initial public offering (IPO) underwriter is typically a large investment bank that works closely with a company to issue stock on the public markets. They are almost always IPO specialists who work for an investment bank.

Underwriters can also be financial professionals that evaluate risk and then determine a price for financial transactions such as purchasing an insurance policy or taking out a mortgage.

In the world of equities, underwriters work with private companies to value their operations, connect with potential investors, and issue stock on a public exchange for the first time.

Key Points

• An IPO underwriter is typically a large investment bank that works closely with a company to issue stock on the public markets.

• An underwriter helps create the market for the stock by contacting potential investors and setting the IPO price.

• IPO underwriters need a Bachelor’s degree, but it helps to have certain other skills and experience in economics and math.

• The IPO underwriting process takes as little as six months from start to finish.

• The underwriter’s stabilization responsibilities only last for a short period.

What Is an IPO Underwriter?

Stock underwriters guide the company that’s issuing stock through the IPO process, making sure they satisfy all of the regulatory requirements imposed by the Securities and Exchange Commission (SEC), as well as the rules imposed by the exchange, such as the Nasdaq or the New York stock Exchange (NYSE).

Recommended: What Is an IPO?

Role and Benefits of an IPO Underwriter

Aside from the fact that an underwriter is required during the IPO process, there are many benefits to this role. An IPO’s underwriter helps create the market for the stock by contacting a wide range of institutional investors, including mutual funds, insurance companies, pension funds and more.

Key Functions of an IPO Underwriter

They first reach out to this network of investors to gauge their interest in the company’s stock, and to see what those investors might be willing to pay. The underwriter uses those conversations to set the price of the IPO.

From there, the underwriter of an IPO works with the company issuing the stock through the many steps that lead up to its IPO. On the day of the IPO, the underwriter is responsible for purchasing any unsold shares at the price it set for the IPO.

The way that IPO underwriters get paid depends on the structure of the deal. Typically, IPO underwriters buy the entire IPO issue and then resell the stocks, keeping any profits, though in some cases they receive a flat fee for their services.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

What Is IPO Underwriting?

An IPO is the process through which a private company “goes public”, and has its shares sold to regular investors on a public market. The company issuing stock works with the IPO underwriters throughout the process to determine how to price their stock and stir interest among potential investors.

Most companies find their way to the investing public through a group of underwriters who agree to purchase the shares, and then sell them to investors. But only a few broker-dealers belong to this “underwriting syndicate,” and some of them sell exclusively to institutional investors.

What Does an IPO Underwriter Do?

In essence, an underwriter in an IPO is the intermediary between a company’s executives and owners, such as venture capitalists, seeking to issue shares of stock and public-market investors.

When a company seeks funding from the capital markets, it must make dozens of decisions. How much money does the company want to raise? How much ownership will it cede to shareholders? What type of securities should it issue? Those are just a few, including what kind of relationship the company wants to have with its underwriter.

Underwriting agreements take different forms, but in the most common agreement, the underwriter agrees to purchase all the stock issued in the IPO, and sell those shares to the public at the price that the company and the underwriter mutually agree to. In this agreement, the underwriter assumes the risk that people won’t buy the company’s stock.

Sometimes a company works with a group of underwriters, who assume the risk, and help the company work through the many steps toward an IPO. This involves issuing an S-1 statement. This is the registration form that any company needs to file with the SEC to issue new securities.

The S-1 statement is how companies introduce themselves to the investing public. S-1 requires companies to lay out plans for the money they hope to raise. The IPO underwriter also creates a draft prospectus for would-be investors.

💡 Quick Tip: IPO stocks can get a lot of media hype. But savvy investors know that where there’s buzz there can also be higher-than-warranted valuations. IPO shares might spike or plunge (or both), so investing in IPOs may not be suitable for investors with short time horizons.

What Qualifications Does an IPO Underwriter Need?

Underwriters work in many roles across the finance sphere. You could be a mortgage underwriter, assessing the creditworthiness of certain borrowers. You could work in the insurance industry. Becoming an IPO underwriter, and bringing private companies into the public marketplace, requires understanding how businesses work, and how the equity markets function.

At minimum an IPO underwriter needs a Bachelor’s degree, but it helps to have certain other skills and experience. For example, would-be underwriters might consider a background in economics as well as math. Underwriters generally need good analytical, communication, and computer skills.

Educational and Professional Requirements

There are a number of certifications that apply in the underwriting field in general, but there isn’t a specific designation for IPO underwriters. It’s more common for someone who wants to work with IPOs to get their Masters in business administration (MBA), and from there to work at an investment bank.

The IPO Underwriting Process

Underwriting an IPO can take as little as six months from start to finish, though it often takes more than a year. While every IPO is unique, there are generally five steps that are common to every IPO underwriting process.

Step 1. Selecting an Investment Bank or Broker Dealer

The issuing company selects an underwriter, usually an investment bank. It may also select a group or syndicate of underwriters. In that case, one bank is selected as the lead, or book-running, underwriter.

One kind of agreement between the issuing company and the underwriter is called a “firm commitment,” which guarantees that the IPO will raise a certain sum of money. Or they may sign a “best efforts agreement,” in which the underwriter does not guarantee the amount of money they will raise. They may also sign in “all or none agreement.” In this agreement, the underwriter will sell all of the shares in the IPO, or call off the IPO altogether.

There is also an engagement letter, which often includes a reimbursement clause that requires the issuing company to cover all the underwriter’s out-of-the-pocket expenses if the IPO is withdrawn at any stage.

Step 2. Conduct Due Diligence and Start on Regulatory Filings

The underwriter and the issuing company then create an S-1 registration statement. The SEC then does its own due diligence on the required details in that document. While the SEC is reviewing it, the underwriter and the company will issue a draft prospectus that includes more details about the issuing company. They use this document to pitch the company’s shares to investors. These roadshows usually last for three to four weeks, and are essential to gauging the demand for the shares.

Step 3. Pricing the IPO

Once the SEC approves the IPO, the underwriter decides the effective date of the shares. The day before that effective date, the issuing company and the underwriter meet to set the price of the shares. Underwriters often underprice IPOs to ensure that they sell all of their shares, even though that means less money for the issuing company.

Step 4. Aftermarket Stabilization

The underwriter’s work continues after the IPO. They will provide analyst recommendations, and create a secondary market for the stock. The underwriter’s stabilization responsibilities only last for a short period of time.

Step 5. Transition to Market Competition

This final stage of the process begins 25 days after the IPO date, which is the end of the “quiet period,” required by the SEC. During this period, company executives can not share any new information about the company, and investors go from trading based on the company’s regulatory disclosures to using market forces to make their decisions.

After the quiet period ends, underwriters can give estimates of the earnings and stock price of the company.

Some companies also have a lock up period before and after they go public, in which early employees and investors are not allowed to sell or trade their shares.

The Takeaway

The IPO underwriter, typically a large investment bank, plays a vital role in the process of taking a company public.

They help to guide the company through the many hurdles required to go public, including making sure the fledgling company meets all the criteria required by regulators and by the public exchanges. The IPO underwriter helps drum up investor interest in the new company and thereby setting the initial valuation for the stock.

IPOs are an important part of the stock market, and they present an opportunity for investors to get in on a company that may be entering a growth phase by allowing them to buy IPO stocks.

Whether you’re curious about exploring IPOs, or interested in traditional stocks and exchange-traded funds (ETFs), you can get started by opening an account on the SoFi Invest® brokerage platform. On SoFi Invest, eligible SoFi members have the opportunity to trade IPO shares, and there are no account minimums for those with an Active Investing account. As with any investment, it's wise to consider your overall portfolio goals in order to assess whether IPO investing is right for you, given the risks of volatility and loss.

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

What are the responsibilities and duties of an IPO underwriter?

IPO underwriters have numerous responsibilities. They not only shepherd the private company through the IPO process, they reach out to institutional investors and mutual funds to gauge interest and set the initial price of the stock. They buy the securities from the issuer, and sell the IPO stock to investors via their distribution network.

Can multiple underwriters be involved in an IPO

Yes. Sometimes more than one underwriter is required to help a company meet all the criteria set by the SEC and by the public exchanges.

What criteria do companies consider when selecting an IPO underwriter?

The experience and reputation of the underwriter is an important criteria companies use when establishing this relationship.

Can the performance of an IPO underwriter impact the success of the IPO?

Yes. Some industry data suggests that the better an underwriter’s reputation, the more accurate the initial pricing is, and the less likely there will be long-term underperformance.

Photo credit: iStock/katleho Seisa

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.

New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIN0723043

Sep

2023

A Guide to Tech IPOs

By Inyoung Hwang | Growing Wealth, invest, Investing | Comments Off

Tech IPOs are essentially the same as any other initial public offering, but they specifically involve a technology company going public, and making its stock available for purchase on the open market.

Given the tech sector’s growth over the past couple of decades, tech IPOs tend to get called out because of somewhat higher investor interest.

But the IPO process isn’t simple or easy for firms to navigate, and for investors, buying shares of newly public companies can carry significant risk. As such, there are many things to consider and know about tech IPOs.

Key Points

• Tech IPOs involve a technology company going public and making its stock available for purchase on the open market.

• Going public means companies will be exposed to a broader array of investors, greater regulatory requirements, and increased trading of its company shares.

• Investors should conduct their own due diligence before investing in an IPO, including reading the prospectus and asking questions.

• Companies become subject to regulations by the U.S. Securities and Exchange Commission and pay listing fees to the exchange they choose.

• Alternatives to traditional IPOs include direct listings and special purpose acquisition vehicles.

What Are Tech IPOs?

A technology initial public offering or IPO marks the debut of a company’s shares on the stock market. Issuing an initial public offering is a multi-step process that involves venture capitalists, investment bankers, regulators and stock exchanges.

Tech IPOs tend to garner excitement from investors of all stripes, but while newly public tech stocks are often believed to offer rapid growth potential, not all live up to expectations.

For that reason, investors may benefit from revisiting some best practices or tips for investing in tech companies before putting their money on the line. IPO shares can be highly volatile.

The Appeal of Tech IPOs

Large tech companies have dominated the U.S. stock market for several years. Investors have flocked to shares of the so-called FAANG stocks — Facebook, Apple, Amazon.com, Netflix and Google — as soaring prices of those companies left many investors looking for the next big thing out of Silicon Valley, Seattle, Austin, and other tech-dominated cities.

IPOs had traditionally been an important step for new tech companies, and signaled a level of corporate maturation. That’s because going public means companies will be exposed to a broader array of investors, greater regulatory requirements, and increased trading of its company shares.

But in recent years, some tech companies have shunned the traditional IPO model, either by staying private for longer periods of time, or seeking alternative routes to going public, like direct listings, or by merging with special purpose acquisition vehicles (SPACs).

💡 Quick Tip: IPO stocks can get a lot of media hype. But savvy investors know that where there’s buzz there can also be higher-than-warranted valuations. IPO shares might spike or plunge (or both), so investing in IPOs may not be suitable for investors with short time horizons.

How Tech IPOs Work

A company may pursue an IPO in order to raise funds or obtain more liquidity for its shares. IPOs can also be an exit strategy for early stakeholders like corporate insiders, angel investors, and venture capitalists. And lastly, a small startup may think listing its shares will potentially increase its brand recognition and prestige. Public companies tend to have more shareholders than private ones.

The IPO Process

When a tech company is ready to go public, it typically starts the IPO process by hiring investment bankers. The process by which investment bankers handle an IPO is called underwriting.

The investment bank will buy the shares from the company before trying to transfer them to the public market. One bank typically leads the IPO process, but a handful of banks are typically involved, typically as means of diluting risk.

Underwriters then typically hold roadshows — events in which they pitch institutional investors on the IPO. The idea is to build up hype and demand for the new stock, increasing its value.

Institutional investors include hedge funds, mutual funds, and pensions. If these investors want to buy the IPO shares, underwriters can allocate them a proportion of the shares that will be listed. This all occurs before the stock debuts on the public markets, where retail investors can purchase shares.

Investor Due Diligence

Investors with the option to invest in an IPO should do so only after having conducted their due diligence. The SEC states that “being well informed is critical in deciding whether to invest. Therefore, it is important to review the prospectus and ask questions when researching an IPO.”

Investors should receive a copy of the prospectus before their broker confirms the sale. To read the prospectus before then, check with the company’s most recent registration statement on EDGAR, the SEC’s public filing system.

💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

IPO Regulatory Requirements

Going public also means that companies become subject to regulations by the U.S. Securities and Exchange Commission (SEC) . Under those regulations, companies will be required to make quarterly and annual filings and disclose material events to the public, among other things.

If a company gets SEC approval to go public, the underwriter files an S-1 and puts together a prospectus. The prospectus includes financial data and describes what the proceeds will be used for, as well as potential risks to investors.

Listing Tech IPOs

Tech companies also need to choose their listing exchange. This isn’t the only market where investors can trade the company’s shares but a significant proportion of volume will be done on the listing venue. The two biggest markets for IPOs in recent years have been the New York Stock Exchange (NYSE) or Nasdaq, though there are many types of exchanges.

Nasdaq has attracted many large tech companies in its history, such as Apple, Amazon.com, Facebook, Google and Microsoft. But the NYSE has likewise drawn some big tech IPOs. The listing fees that companies pay for NYSE are more expensive than for Nasdaq, but only stocks listed on the Nasdaq qualify to enter the Nasdaq 100 Index, which is the basis for the popular Invesco QQQ exchange-traded fund.

The day of the IPO, the shares are listed on the exchange and trading commences. At Nasdaq, the process of price discovery is all done electronically, while at NYSE, floor traders also play a role.

Underwriters typically underprice shares in order for them to have a strong performance, or “pop” on the first day. This basically means that they hope shares will gain significant value on the first day they’re listed for trading.

Many stocks, after an IPO, are subject to lock-up periods. This is a period of time after the public offering in which early investors aren’t allowed to sell their shares. Lock-up periods are designed to keep share prices stable post-IPO.

Staying Private

In recent years, many tech companies have stayed private for relatively longer periods of time before going public, finding more avenues for funding as the venture capital world has expanded.

One reason: Going public is an expensive, often onerous process. Investment bank fees can take up 4% to 7% of an IPO’s proceeds alone. As such, many firms are incubating longer before IPOing.

New IPO Routes for Tech Companies

The IPO market experienced something of a resurgence in 2020 and 2021 as the stock market reached new peaks. The tide turned in 2022 and 2023, however, as the number of IPOs fell considerably, largely due to rising interest rates, inflation, and shaky economic sentiment.

For some tech companies that have decided to go public in recent years, many have tried alternatives to the traditional IPO.

SPACs, or special purpose acquisition vehicles (or special purpose acquisition companies), have proven to be one effective method for some companies. Also known as blank-check companies, SPACs use the IPO process to raise money and then look for companies to merge with. They often have a two-year time horizon to find an acquisition.

Some companies also opt for direct listings. In a direct listing, companies forgo the step of hiring an investment bank as an underwriter. In such listings, banks may still play a smaller advisory role, but companies instead rely on the auction by the stock exchange to set their IPO price.

No additional capital is raised in direct listings, meaning they’re typically done by cash-rich companies that are already widely recognized by the market and public.

Pros of Tech IPOs

All things considered, tech IPOs do offer investors a number of potential advantages.

Initial Momentum

If you’re able to invest early in a hot tech IPO, you may be able to ride an initial wave of enthusiasm to some serious gains. Those gains may be short-lived, however, and there’s always the risk that enthusiasm among investors is not sustained in any significant way.

A Growing Sector

Long-term prospects for the tech sector are interesting. Tech has been a growth industry for many years, but there are many other areas in which tech companies are expanding now: machine learning, artificial intelligence (AI), bio- and pharmatechnology, and many more. Investors may want to keep this expansion in mind, as technology gains prominence in other fields.

Further Income

It’ll depend on the specific stock, but investors may be able to take advantage of extra income opportunities from their holdings, such as dividend payments. Usually, more mature stocks tend to pay dividends, but if you hold on long enough, IPO shares could become revenue-generating holdings.

Cons of Tech IPOs

Tech companies have their downsides; they face stiff competition from other innovators and disruptors. So investing in a tech IPO includes certain risks.

Sector Risk

Tech is still growing, but it’s a volatile space. In fact, many tech companies may be described as high-risk stocks, as they may be relatively new to the fold compared to more established companies. As such, initial valuations may not fully price in how risky these companies are.

Too Much Hype

Some stocks may not live up to the initial build-up that comes with any IPO. Consider that a significant percentage of many IPO stocks experienced a loss in value during their first day on the market. So, it’s possible to get caught up in the hype, and overlook some glaring issues with some IPO stocks.

Regulatory Risks

Regulation and government oversight of tech companies could also be changing. Many tech companies have found themselves in the crosshairs of regulators for antitrust issues, among other things, and such cases could have widespread ramifications for tech companies when it comes to their regulatory landscape and competitive practices.

Tech IPOs: Pros and Cons
Pros	Cons
Initial momentum	Sector risk
Growing sector	Too much hype
Possible income opportunities	Regulatory risks

The Takeaway

Tech IPOs are when tech companies list their shares for purchase on a public stock exchange. Though the method through which many tech firms are going public has changed (through SPACs, etc.), many tech companies are still using the traditional IPO process.

Buying IPO stocks of tech firms can offer investors an opportunity to invest in high-growth stocks with the potential for sizable gains. However, risks include high valuations for unseasoned companies, as well as disappointing share price performance after the listing.

Invest with as little as $5 with a SoFi Active Investing account.

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.

New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIN0623091

Sep

2023

What Does Credit Reference Mean for an Apartment?

By Marcy Lovitch | Credit, Family Finances, relay | Comments Off

Finding an affordable apartment you love in the neighborhood of your choice can feel like you’ve won the lottery. But before you can call the movers, you’ll need to take the first step and go through the screening process. In most cases, this means filling out a rental application.

Rental applications are a way for landlords to determine whether or not a potential tenant will be responsible when it comes to paying the rent. In order to do so, the property owner or management company may also ask for a credit reference. This is a person, company, or document that provides details about your credit history.

There are different types of credit references, and your landlord may require more than one to ensure you’ll be a no-risk, trustworthy tenant.

What Are Credit References on a Rental Application?

Along with asking for your name, address, employment information, and past residential history on your application, a landlord will want to make sure you regularly meet your financial obligations. After all, a landlord or property manager doesn’t want to take a risk on someone who doesn’t pay their monthly rent in full and on time. This is where a credit reference comes into play.

Credit references are documents, businesses, or individuals that can verify your credit history. Similar to character references a prospective employer might request before they hire you, a credit reference refers to a person or a company with whom the applicant has had a positive financial relationship.

The credit reference provides the landlord with details about an applicant’s financial situation, such as the length of the financial dealings with the entity, the applicant’s payment record, and whether they’re in any debt.

Check your score with SoFi

Track your credit score for free. Sign up and get $10.*

How Does a Credit Reference on a Rental Application Work?

When you decide upon an apartment rental, the first thing you need to do is notify the landlord or property manager as soon as possible, especially if you live in a city where rental competition is stiff. If the place is still available, you’ll be asked to submit a paper or electronic rental application.

Depending on the landlord or property manager’s application process, you may be asked to provide credit references on the form. This could entail listing any current creditors’ names and contact information, detailing the amounts owed on any loans, or answering whether or not you’ve ever declared bankruptcy.

After you’ve completed the application, the landlord will typically contact the credit sources you provided. It’s best to be honest when filling in any past and present financial information on the application. If not, chances are the landlord will find out on their own during the credit reference check. Not being truthful at the start can be a glaring red flag for the landlord, increasing the likelihood they’ll reject the application.

Types of Credit References

There are several kinds of credit references a landlord may use to confirm you’re in good financial shape and will be able to afford the monthly rent. Financial agreement documents such as asset documentation, credit reports, and character reference letters are some things landlords often request.

Read on to learn about three types of credit references a landlord may require:

Credit Report

Credit reports — a credit check used by employers, lenders, and landlords to gauge how responsible a person is when it comes to managing credit and handling their financial obligations — are the most commonly used credit reference. These statements detail someone’s credit history, including their payment record, current account balances, and any outstanding debts, including those referred to a collection agency.

There are three major credit bureaus that issue credit reports. A landlord may use one or two of these credit reporting agencies or order a more comprehensive tri-merge credit report, which culls data from all three companies.

As part of their credit check, landlords may request your FICO score or, less commonly, your VantageScore. In either case, this is a three-digit number that reflects how dependable you are when it comes to paying back borrowed debt. Both companies use a 300-850 credit score range.

Landlords typically look for a score of 600 or above. Depending on whether they pull your credit score through FICO or VantageScore, where the number lands in the 600 plus range may be considered a good or fair credit score. For instance, FICO’s fair credit scores are between 580 and 669, while their good credit range is between 670 and 739. VantageScore’s fair credit scores range from 601 to 660, and good credit falls between 661 to 780.

According to the Fair Credit Reporting Act, a landlord cannot run a credit check without your prior authorization. And, if you do give permission to run a credit check, the landlord may charge you an additional fee, so be sure to check your rental application carefully.

💡 Quick Tip: Check your credit report at least once a year to ensure there are no errors that can damage your credit score.

Asset Documentation

Asset documentation gives proof of a person’s financial assets and is considered a highly effective type of credit reference. Landlords may want to know if an applicant has back-up funds for rent in case there are unseen circumstances, such as job loss.

A landlord may ask you to provide certain documents, such as several months’ worth of statements from your current checking, savings, retirement, and/or investment accounts. In order to obtain these records, you’ll need to ask the financial institutions who manage your assets to provide them to the landlord or property management company, unless you can supply them on your own.

Character and Credit Reference Letters

Professional and personal references can be a great option for vetting someone’s financial reliability. While a landlord might be more interested in your credit score and asset documentation, a character reference letter may help give you an edge.

Character reference letters can come from a previous landlord, employer, faith leader, professor, or an entity you’ve previously done business with, like a utility company. Ideally, you’ll want to get a letter from any source that can speak to your reliability and conscientiousness and explain why you’d be an ideal tenant.

How Do Credit References Impact Rental Applications?

Credit references can have a significant impact on whether or not you get the apartment. If the landlord reviews your credit history and has any concerns about your income to debt ratio or low credit score, they can turn you down.

On the flip side, seeing a stellar record of paying your bills on time and verifying you’ve been a trustworthy tenant in the past can help convince a landlord you’re the right choice.

Examples of Credit References

• Letters of reference from any former landlords stating you’ve paid your rent routinely and have had an issue-free relationship

• A copy of your credit report

• Checking or savings account bank statements

• Documentation from a utility company listing a positive payment history

• Character reference letters from personal or professional acquaintances

When You Need Credit References on an Apartment Application

Generally, landlords will want credit references when considering whether to approve an application of a first-time renter, someone who makes a lower salary, or a person who has no credit history. In such scenarios, the renter will want to consider having a guarantor or cosigner on the application.

Guarantors or cosigners are people who have good credit and can sign the lease with you. A cosigner can be a parent, family member, or friend who agrees to take legal responsibility for paying your rent if for some reason you can’t.

How Long Does It Take to Process a Rental Application?

In most cases, rental applications are approved within 24 to 72 hours. Property management companies that oversee larger complexes and have ample staff can process applications faster than a solo landlord.

It may take longer to approve an application when, for example, you’re applying with a cosigner or if you’re renting with roommates. That’s because there are more people involved, more credit references to gather, and more credit reports to pull.

Tips for Credit References

Prepare in Advance

You may not be initially required to provide credit references on your application, but that doesn’t mean a landlord won’t ask for it later. Get your ducks in a row by gathering any necessary paperwork and reaching out to anyone you may want as a character reference.

If you think you’re going to need a cosigner, start a conversation with that person so they’re not totally blindsided or asked to commit at the last minute.

Check Your Credit Report

Running and reviewing your credit report can tip you off to any errors, indicate any fraudulent activity, and provide your current credit score. You can also resolve any credit issues that might give a landlord a reason to reject your application.

According to the Consumer Financial Protection Bureau, you are entitled to request one free copy of your credit report every year from each of the three credit bureaus. You can order your free report by visiting AnnualCreditReport.com . Note that all three credit report providers are offering free weekly online credit reports until the end of 2023.

You can also sign up for credit score monitoring through SoFi and get insights on your financial health and credit.

Choose Your Character References Carefully

Make sure the people you’re asking to vouch for your dependability are those you trust, know well, and will be able to communicate clearly what makes you a good renter.

Don’t Be Afraid to Give the Landlord a Head’s Up

Sometimes a lower credit score or a record of late or missed payments may not be your fault. Certain life events can cause financial upheaval, such as being a victim of identity theft, getting laid off, or abruptly losing a roommate, leaving you responsible for the entire rent.

Writing a letter to the landlord offering an explanation for the spotty record — and attesting you’re working hard to improve your credit — may save you from being rejected outright.

💡 Quick Tip: An easy way to raise your credit score? Pay your bills on time. Setting up autopay can help you keep your account in good standing.

The Takeaway

When applying for a rental apartment or home, providing solid credit references allows a landlord or a property manager to determine your ability to pay the rent in full every month. Credit references can impact whether or not your application is approved. Knowing what types of credit references you may have to produce — and taking care to monitor your credit report and clean up any issues — can help boost your odds of landing that coveted home.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

What should I put as a credit reference?

Your landlord will typically be the one to dictate what credit references they want. But if they only run a credit report, you may want to send along anything else that could bolster your financial worth, such as savings and investment account statements.

What is an example of a credit reference for an apartment application?

Examples of credit references may include your bank, previous landlords, companies whose bills you pay regularly, supervisors, or your faith leader.

How do you get a credit reference?

You may be able to obtain a credit reference by requesting a copy of your credit report, authorizing a credit check, or asking for a character reference letter.

How many credit references do you need?

It depends on the landlord. While some won’t ask for any credit references, others will require one or more. To be safe, it’s probably a good idea to plan for at least two

Can you buy a credit reference?

No. Credit references need to be earned by capably managing your money, paying your bills, and having minimal debt. While you can pay a credit repair company to go over your credit report and dispute any errors on your behalf, you still have to do the heavy lifting of diligently meeting your overall financial responsibilities.

Photo credit: iStock/FluxFactory

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL0523008

Sep

2023

How Much Money Does a Makeup Artist Make a Year?

By Jacqueline DeMarco | Building Your Career, Life & Career, relay | Comments Off

If you dream about spending your days creating beautiful looks with your favorite beauty products, then becoming a professional makeup artist may be a good career to pursue.

But just how much money does a makeup artist make? Unlike some other creative fields, this profession can be lucrative. According to the U.S. Bureau of Labor Statistics (BLS), the median annual salary for a makeup artist is $134,750.

Keep reading for more insight into makeup artist earnings, how salaries vary by state, and what this job entails.

What Is a Makeup Artist?

A makeup artist is a skilled professional responsible for applying cosmetics and beautifying an individual’s appearance for various purposes. They use their expertise to enhance facial features, create desired looks, and achieve specific artistic visions. Makeup artists work across various industries, including fashion, film, television, theater, special effects, weddings, and events. In addition to traditional makeup applications, some makeup artists specialize in special effects makeup, enabling them to create realistic wounds or fantastical characters for films or theater productions.

Personality plays a big role in whether or not someone will enjoy being a makeup artist. A job as a makeup artist can be suitable for introverts, as it allows them to work in a more controlled and focused environment with clients one on one. However, working in certain settings, such as movie sets or high-profile events, may be a better fit for extroverts.

Check your score with SoFi

Track your credit score for free. Sign up and get $10.*

How Much Is a Makeup Artist’s Starting Salary?

How much does a professional makeup artist make when they first begin their career? Like anyone embarking on a new career path, makeup artists tend to earn less when they’re just starting out. According to the latest BLS data, the lowest 10 percent of earners in the makeup artist field earn a median salary of $38,070. However, as artists gain more experience and exposure, they have the potential to earn much more than that entry-level salary.

💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.

What Is the Average Salary for a Makeup Artist?

Makeup artistry is a type of trade job that has the potential to earn a lot of money. Let’s take a closer look at the average salary for a makeup artist.

• How much does a makeup artist make a year? The median annual salary for a makeup artist is $134,750.

• How much does a makeup artist make per hour? When it comes to hourly pay, makeup artists earn a median of $64.78

Where someone lives can play a major role in how much they earn as a makeup artist. Because the cost of living varies so much by state, salaries can vary a lot, too. While the BLS has limited data collected on how much makeup artists earn in different states, the information it does have makes it clear how much salaries can vary.

For example, in Nevada, the median annual salary for a makeup artist is $30,760, whereas in New York it is $125,000. Alongside cost of living factors, there may be more job opportunities for makeup artists in some states. New York City is a major fashion and entertainment hub that likely has a high demand for makeup artists, which can lead to more competitive pay rates.

Median Makeup Artist Salary by State for 2022
State	Median Annual Salary
California	$97,220
District of Columbia	$93,810
Florida	$38,820
Illinois	$31,570
Nevada	$30,760
New York	$125,000
Source: BLS

Recommended: The Highest-Paying Jobs in Every State

Makeup Artist Benefits & Job Considerations

While makeup artists have the potential to earn a six-figure salary, the biggest downside of this job is that it is not common to earn benefits like health insurance or to have access to a 401(k). This is because most makeup artists are self-employed and are responsible for securing and paying for any traditional employee benefits they desire.

Pros and Cons of Makeup Artist Salary

Like all jobs, working as a makeup artist comes with a unique set of pros and cons to consider before pursuing this career path.

Pros

• Creative opportunities: Makeup artists have the freedom to express their creativity by creating unique looks for their clients, whether it’s for a photo shoot, movie, or special event.

• Interesting workdays: The profession offers a diverse range of opportunities, from working on movie sets to collaborating with cosmetic retailers.

• No formal education required: Unlike many other careers, becoming a makeup artist doesn’t demand a college degree.

Cons

• Restricted earning potential: The industry’s salary standards may limit the earning potential of makeup artists, with only a few able to negotiate higher pay. What’s more, self-employed artists may not always receive consistent income or benefits.

• Geographic limitations: Makeup artists may need to relocate to major cities like Los Angeles, New York, Chicago, or Las Vegas to find steady work, and they may also have to travel with clients for various projects.

• Irregular work schedule: Makeup artists often have to adapt to erratic work hours, including weekends, holidays, and long periods of uncertainty between gigs. Maintaining a stable work-life balance could be a challenge.

💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

Makeup artistry can be a rewarding career — and potentially lucrative. How much money does a makeup artist make a year? The median annual salary for a makeup artist is $134,750. While the work can be creative and glamorous, it also lacks a traditional work schedule. Plus, most makeup artists have to foot the bill for their own employee benefits. Those considering a career in this industry need to carefully consider if the advantages of this role (like a high median salary) outweigh the disadvantages.

SoFi helps you stay on top of your finances.

FAQ

Can you make good money doing makeup?

If someone is asking, how much does a makeup artist make in a year, they’ll probably like the answer. The median annual salary for a makeup artist is $134,750, so yes, it is possible to make good money doing makeup. However, some states, like New York, have much more lucrative job opportunities than other states.

Can you make six figures as a makeup artist?

Yes, it is possible to make six figures as a makeup artist. The median annual salary for makeup artists nationwide is $134,750, according to the latest BLS data. However, where they live plays a major role in how likely they are to earn a $100,000 salary as a makeup artist.

How much profit does a makeup artist get?

The profit a makeup artist receives varies greatly depending on their employment status and the specific makeup services they offer. Self-employed makeup artists have the potential to earn the full profit after deducting operating costs, while those working for cosmetic retailers or salons may receive a fixed salary or commission-based earnings. Factors such as location, experience, clientele, and demand for their services can also impact overall profit.

Photo credit: iStock/anatoliy_gleb