How does a person buy ipo stock ?
Related questions:
- If any person want to start a company, then can he raise his shares in markets and if he can what’s IPO? Ghislaine asks: As we know , a company can offer IPO (initial public offer)only if that company is a public...
- Can individual investors buy stock from an IPO? Noma asks: What I mean is when stock is offered for the first time for a company, can individual investors...
- Why would a company split stock options pre-IPO? Valencia asks: I have been given stock options in my company which is currently private. Recently they performed a two...
- what is IPO in stock market? Felicitas asks: let me know about IPO in stock market of india ...
- IPO for stock? Miki asks: How will I know ahead of time when a company is ready to offer an IPO for their...
1. Have lots of money (in your brokerage account and do lots of revenue for the broker); have contacts or get lucky with a broker who will give you shares.
2. Have an account with the broker prior to the IPO and the broker must be an “Underwriter” or involved in the “Syndicate Group” in order to get shares.
The big investment banks, GS, MS, LEH, MER, UBS are the firms who do most of the deals, so they will have the shares. These firms give IPOs as a “gift” to their best clients who have done lots of business with the firm and with the broker. I know I used to work with one of big guys.
It also helps if the broker is the branch rep for the syndicate department, or if you broker is friends with him/her. This person has greater control to allocate shares within the branch. The senior big producing brokers tend to get the bulk of the shares. The rookies get none.
Small deals means tough to get shares. Big deals better. A lot of people got Visa (406 million shares worth), and that tells me it was not going to $100 overnight.
3. If you call a broker and ask for IPO shares and you don’t have an established business with him/her, they won’t be very responsive.
4. IPO’s aren’t everything like they were in the 90’s .com. If the company has value (increased earnings, etc) the stock will rise overtime.
If you would like to be a part of an IPO, first your brokerage has to have availability. Second you should have a pretty good relationship with your broker, and by broker I don’t mean your Etrade account, for you to actually get some play - a big account helps too.
The investment banks that act as part of the syndicate control the allocation of IPO sales. If the IPO is going to be underpriced, they tend to allocate the majority of shares to their good customers.
If the IPO is not underpriced,then they allocate shares to anyone who wants them.
The average investor usually gets screwed in IPO allocations — suffering fromthe Winner’s Curse.
The words “qualified investor” comes to mind. Usually the net worth of these investors is quite large, bout a half million or more. But these investors also need to be in the right place at the right time, ie, investors in preferred shares of JPM or others, if they are going to get offerred a “good deal”. JPM and others can offer this because the investment is helping their stock too. They want high powered investors though.
To purchase IPO shares you must met certain criteria. First you must maintain a brokerage account with one of the member of the syndicate that is underwriting the shares. Traditionally these firms are the big investment banks like Morgan Stanley, Merrill Lynch, Goldman Sachs, UBS, or Citi. Wachovia and Bank of America have become more involved as they’ve expanded their investment banking services, and those firms were actually involved in the Visa IPO. The syndicate and the company determine the number of shares that are allocated, and then those shares are allocated by agreement to the underwriting firms. If you are an existing customer (minimum of 6 months with an account at the firm) the firm will accept an indication of interest in the shares. This means that you tell your broker that you would like to recieve shares of the IPO if they are available. When the firm knows how many shares they are being allocated they will review the information about the accounts that expressed interest, to determine suitibility. If you meet the suitability as defined by SEC guidelines and meet the firm criteria for allocation (time you’ve had an account, size of account, how often you trade, etc., the firms’ establish their own criteria) you will be allocated an amount of shares which is based both on your account size and the % of allocation that the firm recieved.