Investing in the stock market can be incredibly difficult, but a lot of fun in many ways! One of the more enjoyable areas, or maybe one of the more frustrating areas depending on how you look at it, is the IPO market or initial public offering market. The problem is, many individual investors don't know how to crack into the IPO market and take advantage of these hot stocks on the way up.
In this article I'm going to talk about the initial public offering market, how you can take advantage of IPOs, what to look out for, what to stay away from, and how to find brokers who are willing to sell shares of IPO to you as an individual investor.
Pot Stock
Finding IPO shares can sometimes be an incredibly difficult journey to undertake. Brokers tend to offer IPO shares to their very best clients as a sort of incentive or thank you for using them as their broker. Let's face it, there are an infinite number of stockbrokers out there and there's no real reason to stick with one broker or another... so any way they can sweeten the pot for their best customers and clients, they'll take advantage of. One of the main tools they have in this area is the issuance of IPO shares.
What this means to you as a smaller individual investor without a huge stock portfolio and a lot of money behind you is that you will often be frozen out and unable to get a hold of IPO shares before they come on the market. Of course the point of owning IPO shares is to take advantage of that seemingly constant jump in price that many, if not most IPO shares tend to make.
This becomes an even bigger problem when the stock being issued is incredibly popular, which is the exact stock that you want to own! But there are some things you can do and I'll talk about them now...
First you're going to need to get advanced information telling you which IPOs are about to occur. Your best bet is to find this information from the SEC, the securities and exchange commission.
You want to tell your stockbroker as absolutely far in advance as possible which upcoming IPO shares you are interested in. Almost all IPO shares are priced at the very last minute meaning you're not going to know before hand how much you'll have to pay for them. Be sure to let your broker no that you're willing to pay the top limit of the price range that's offered (of course, make sure that you are willing to pay that much!). This lets your broker no that you are very serious about the issue.
Of course, you can change your mind before the stock is issued if you think you're going to be offering too much per share, but if you do that, your stockbroker will remember it the next time around and will not be as apt to offer you IPO shares. So keep that in mind.
Remember, the larger your trading account is with your broker, the more likely it is that they will work with you to find you pre-IPO stock. If your broker can't promise you IPO shares, it may be in your best interest to find a smaller stockbroker who is more willing to put in the effort on your behalf.
The fact of the matter remains, many times in the IPO market it all comes down to tenacity. If you're just willing to keep pushing and pushing, sometimes that's the only thing that will work. No matter what though one thing is for sure, IPOs will continue to be very exciting for years to come.