How can an individual investor become involved in an IPO. Please describe in detail?
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you would need to have an active account at a brokerage firm that deals with IPO’s on a regular basis. only the favorite customers will have a shot at a hot IPO, and your allocation will most likely be small. the institutional investors and friends of the company and brokers get a substantial position which they can trade out of at a profit. they are called “strong hands”.
By becoming involved, I asssume you mean buying the shares of the IPO. If you want to be involved in the listing processs, you either have to be a banker, accountant or lawyer.
Here is the process in detail:
1) Company makes application to the stock exchange for listing;
If it is oversubscribed, the bank ususally allots the shares; and finally
2) Company prepares all documentation to fulfill stock exchange requirements;
3) once all the documentation is done, stock exchange gives formal approval for listing;
4) Banks underwrite the IPO process - meaning that if the shares fail to sell at the listed price, the bank will have to buy it themselves (therefore the bank makes its book first - presells to good existing customers);
5) To do the above, bank brings the company on a road show to meet investors;
6) Certain stakes may also be sold to strategic investors, others sold cheap to friends and family;
7) the company usually asks for a certain amount of shares to be in the public hands. Thus, you can get the prospectus and make an application.
9) listing day.
Hope this helps
Conventional wisdom is don’t buy the IPO. It virtually always will drop in the next 6 months. Buy at a later time.
Just buy the shares at the open the day it starts trading.
If you are talking about how can you buy shares at the initial price you need to open a brokerage account at etrade.com
Here are some basic rules:us.etrade.com/e/t/applogic/IPOCenter?Message=IPOHowto:1