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How do I get IPO shares?

How do I get IPO shares?

Participating in an IPO is generally limited to institutional investors. However, if you are a high net worth client at a brokerage firm that has access to the IPO, you may be able to purchase some shares.

First, you need to know that investing in IPOs is considered speculative and only suitable for experienced investors will substantial assets. If you meet the criteria that your brokerage has for allowing IPO trading, which may include a minimum account balance of $250,000 or so, you may be allowed to submit an Indication of Interest (IOI), which is a document used to request shares in the IPO.

If it is a really "hot" IPO, then it will be over-subscribed -- this means that the number of requests for shares will significantly exceed the number of available shares for the distribution to the public. Most of these shares will be snatched up by institutional investors who have established relationships to the brokerages who are part of the selling syndicate.

If you are an experienced investment client with a sizable account at your brokerage firm, they may make it a priority to fill some of your order. Most orders are only partially filled, even for the institutional clients.

Basically, if it is an IPO for a company that you have actually heard of before, you will probably find it next-to-impossible to buy any IPO shares. Your brokerage, or another source, may give you information about upcoming IPOs for companies that they believe are promising.

These companies won’t have to disclose their books for previous years, since they were not publicly traded then, so it is hard to know what to expect. This, of course, makes them more speculative than other stocks.

It may be just as well that you aren’t able to access the more promising IPOs, too, because there is a chance that the market will mark them down for you by the time a few months have gone by.

Another way to participate in IPOs is to pick up shares of mutual funds and ETFs that invest in them for you, and more of these have made their way onto the market in recent years.

Keywords: investments, mutual funds, portfolio management, Exchange Traded Funds (ETFs), institutional investing, secondary market, primary market, Initial Public Offering (IPO),
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