4 Companies That Let Customers Invest First in Their IPOs

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Dave & Buster's Hollywood & Highland Grand Opening
Mark Davis/Getty Images for Dave & Buster's
Folks go to Dave & Buster's Entertainment (PLAY) to unwind, fuel up, and have some fun. However, last year, a few opportunistic regulars got a chance to make some money, too.

The chain of 73 big-box venues -- with full-service dining, a lively sports bar and a mammoth-size video game arcade -- went public last year, but it decided to hold a few of the shares for its customers. It teamed up with Loyal3 to offer a sliver of its IPO shares through the consumer-facing portal.

It paid off to those who took advantage of the offer. Dave & Buster's went public at $16 in October, and it has gone on to nearly double in five months. A better-than-expected showing in its first quarter as a public company and a healthy appetite for restaurant stocks has served those who got in on the chain's debut well.

IPOs are usually hard to buy into before they begin trading. Underwriters tend to allocate shares to their largest institutional and private clients, leaving little chance for ordinary folks with ordinary account balances a shot ahead of the aftermarket pop.

Dave & Buster's was able to save some of that excitement for fast-acting individual investors, and it's not the only company that has let ordinary folks get in on the fun. Some have turned out great for the early buyers, but there are also some horror stories. Let's take a look at some of the other companies that let fans buy in first.

GoPro (GPRO)

The top dog in wearable cameras also wanted to give its user base a crack at owning the company before the rest of the world. It held back on some of its shares, offering them the same social IPO platform -- Loyal3 -- that Dave & Buster's would go on to use a few months later.

GoPro's IPO priced at $24 this past summer, going on to more than quadruple when it peaked at nearly $100 in October. Those who didn't want to seem greedy did the right thing and cashed out at the time. The stock has gone on to lose most of its gains, but it's still trading 60 percent higher than its summertime IPO price.

Boston Beer (SAM)

Perhaps the biggest success story of the few to go this route is Boston Beer. The company behind the Samuel Adams brews went public in 1995, long before social IPO platforms were around. It wanted to give its loyal drinkers a shot at swallowing down some of its stock, so it placed applications for shares in its six packs. The first 33,000 consumer applicants were able to purchase 33 shares at $15.

Patrons who were sober enough to take advantage of the deal should be grateful. With the shares now north of $270, those early drinkers and thinkers are holding on to an 18-bagger over the past 17 years.

Vonage (VG)

Things don't always work out well for customers who buy into IPOs. Retailer Garden Botanika went this route, only to file for bankruptcy a few years later. Vonage is another one that burned investors, but at least it's still around.

The Web-based telephone service went public at $17 in 2006, and months ahead of the offering it let its subscribers buy into the IPO. The stock slipped when it began to trade, falling to the single digits a few weeks later. Making matters worse, many Vonage subscribers who offered to buy the stock refused to pay for the underwater shares. It left Vonage in the unsavory position of having to legally go after its own customers to get them to pay up. The stock continues to trade in the mid-single digits today.

So, be careful. It doesn't always pan out, but sometimes it does pay to back the companies behind the products or services that you believe in.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Boston Beer and GoPro. The Motley Fool owns shares of Boston Beer. Try any of our Foolish newsletter services free for 30 days. Check out The Motley Fool's free report on one great stock to buy for 2015 and beyond.
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