Capturing the fancy of some investors are IPOs, or initial public offerings.

Apple Computer and Microsoft were once IPOs, and they made millions for their early investors. However, when it comes to IPOs, there is no such thing as an Apple a day.

An initial public offering is when a company offers stock to the public for the first time. Typically, an investment banker or group of investment bankers underwrites the IPO through a selling agreement with the company, then selling them to the public, either directly or through dealers, at a higher price. The shares are offered within a specific price range per share, with market demand determining the exact price at any given time.

IPOs are issued for a variety of reasons. Start-up or small companies may want to raise capital to help operate and expand the firm. The owner or owners of an established, privately held company may want to raise the value of their holdings, sell out, or raise cash to reduce debt, expand, or acquire a new business. In some cases, companies initially go public, are later bought out by private investors, and then go public again through an IPO.

The same low interest rates that are currently the plague of investors make initial public offerings appealing to companies, and the markets are being flooded with IPOs. Where IPOs once were the glamorous game of large institutional investors, smaller investors are getting the chance to buy in.

While IPOs offer the chance for an investor to get in on the ground floor of the next Apple or Microsoft, they are not necessarily for the average investor. Many companies, especially start-up firms, are virtually unknown and untested in the marketplace. There may be no demand for a new stock, and its price will decline. Early demand can send the prices of "hot issues'' skyrocketing, only to fall back quickly within a month or even days of issue.

Typically, the people who make the money from IPOs are existing company shareholders, participating venture capitalists, and the underwriters.

During the past 12 months, Bermuda has participated in several IPOs, both locally and in interna tional companies. We have seen Long Botham Boats Company Limited, the holding company of the Henry VIII restaurant, go public with an initial public offering of 175,000 shares. Chips Limited followed, closing earlier this year, and local investors recently invested over $2.4 million in the Bermuda Financial Centre.

In the international arena, ACE Limited, Zurich Reinsurance Centre, Partner Re, Mid Ocean Limited have all offered shares.

If IPOs still intrigue you, discuss new offerings with your financial adviser.

Read the pre-offering documents very carefully. They provide a detailed account of the company's history, business, competition, lawsuits and other risks. Look at the company's track record. Is it loaded with debt? Does it have a strong niche or is it entering an already crowded field? Are new products on the drawing board? What's the five-year potential for growth? Study the company's management team. Do they look competent? Have they ever been involved in a bankruptcy or criminal proceedings? Are they keeping a stake in the company after the offering, or do they look like they're going to bail out? How is the company planning to use the money raised by the public offering? Pay down existing debt? Expand or acquire other businesses? Invest in new products? As with any other investment, look for the long-term prospects rather than roll the dice on a quick-return gamble.

Jennifer A. Patterson, is a Certified Financial Planner and investment advisor with First Bermuda Securities.