IPOs, the initial public offerings, are seen as one of the best ways to invest as they generally offer the lowest price possible of a stock. It’s the ground floor that a company’s stock price starts in most cases and picks up from there. This makes them attractive to many investors, including individual investors that want to grow their money.
While we’ll get to how to participate in an IPO, we first need to cover who can purchase stocks at an IPO. Aside from restricted individuals and companies, anybody can participate in an IPO. There are no specific rules that apply to individuals. However, it comes down to the stock exchange platform and the financial services company you’re working with. These companies that enable you to purchase stocks set their rules and you must follow them.
For example, Fidelity has a minimum requirement of $100,000 or $500,000 in household assets, depending on the IPO, to participate. This can be different from another company that allows you to purchase stocks. That said, it comes down to where you trade.
Participating in an IPO
Since this has many different answers due to a large number of exchange platforms, you need to look at your investment settings. Some companies allow everyone to participate in an IPO; some don’t.
The chances are you are most likely to be able to invest in an IPO. However, don’t get your hopes up too much. Even if you get to invest in an IPO, you may not be able to get as many shares as you would hope to. The majority of the shares are open to institutional investors – about 75 to 80 percent. The rest is available to individual investors, but not everyone gets as many shares as they would hope due to the high demand yet limited supply. That said, it’s important to know the limited supply of IPOs and invest with that in mind.