Inside the IPO process: A beginner’s guide to help get in early

JIM ARMSTRONG: Hey, everybody. Thanks for joining us today. Welcome to "Inside the IPO Process-- A Beginner's Guide to Help Get In Early." I'm Jim Armstrong with Fidelity. And I will be your host today. Evaluating a new and potential investment opportunity can be a critical part of any investor's journey. And so what we're hoping to do today is just give you some tips and guidance to help you understand the general IPO process and feel confident about using Fidelity's IPO research tools.

Let's flash a quick agenda now to give you a sense of exactly where we'll be headed over the next hour or so. We're going to be covering the basics of IPOs, such as what they are and, of course, how individual investors can participate. We'll review how the IPO process works. And in doing so, we'll explain what an Indication of Interest is, an IOI. And we'll also talk about how actual stock allocations can vary.

We will walk through how you should be thinking about the-- evaluating the risks, the volatility, and the realities of IPO investing. And then we'll round things out by giving you a look at some of the tools and resources that are available to you as you continue your research on various IPO opportunities. Now, to help cover all of those fantastic agenda items, we have a pair of exceptional guests who are going to take us through all of our content today. Andrew, Heather, thank you for making time to be with us today. Before we get going, I would love it if you could each just briefly introduce yourself, talk a little bit about what you do here at Fidelity. And Heather, we'll start with you, if that's OK.

HEATHER KNIGHT: Sure. Thanks, Jim. And also, it's great to be here. I work with our brokerage-- or within our brokerage sales organization. And in my role, I actually help bring investment concepts, market insights, and brokerage solutions to life so that our associates can help more clients and make them feel a little bit more informed about financial investment decisions.

JIM ARMSTRONG: Excellent. That's just what we're after today. I appreciate it. Andrew, how about you?

ANDREW RAKOWSKI: Hi, Jim. Thank you. And thanks for having me. It's been a while since I've done one of these so. And Heather, good to see you. So I'm the regional brokerage consultant for Southern New England. So I partner with nine different investor centers and, essentially, act as an additional resource for those offices and their self-directed clients to ensure that they're getting the most out of the Fidelity brokerage platform. And part of that is the IPO offering that we provide.

JIM ARMSTRONG: Thank you. One quick reminder for our viewers just before we get started here-- Fidelity does not provide legal or tax advice. So nothing we talk about today should be construed as legal or tax advice. Everything is going to be rather general in nature. However, we definitely suggest that if you do have specific questions about your unique situation, contact a professional in one of those fields. Maybe it's an attorney or a CPA or a financial advisor, someone who can give you the answers that you're looking for about your unique situation.

All right. With that, Heather, let's get right down to it and make sure that, hopefully, everyone is on the same page as we get started in the conversation. So I'm going to ask you some real high-level questions here. Just lay out exactly what an IPO is and talk a little bit, if you could, about why investors might be interested in one.

HEATHER KNIGHT: Absolutely. An IPO, or Initial Public Offering, is actually when a private company offers shares to the public for the first time and becomes publicly traded. For investors, IPOs create an opportunity to invest in a company that people otherwise couldn't previously invest in or may have only been available before in private markets. So I'd say from an investor's perspective, IPOs create access to companies that were previously unavailable and is often seen as an entry point, too, into a company's public market journey, and also, in many cases, can provide or create an opportunity to even maybe diversify or further diversify a portfolio.

If I were looking at it from the lens of a company, the company perspective, I'd say that it's to raise capital or money and fund growth initiatives in order to expand operations or to invest in new products as well as provide liquidity for early investors, like founders or even venture capital firms. And of course, I think the one thing is-- to consider is that it also increases visibility and credibility in the market.

ANDREW RAKOWSKI: A way to think about it is in IPOs, if you think about a new cereal brand that's first being listed on grocery store shelves for the very first time, and maybe before it was only available to certain buyers, wholesalers, whatever it may be, but now it's available to the public-- and as a shopping public member, we can walk down the aisle and decide if we want to pick it up.

JIM ARMSTRONG: Excellent. I'm actually hoping to learn a lot from both of you today. I have, personally, a high-level understanding of how the IPO process works, not very sophisticated beyond knowing there's a lot of steps involved. It's not a very straightforward thing. So I'd love it if you could just explain how it begins. How does a stock come to market? And Heather, we'll start with you.

HEATHER KNIGHT: So I think to begin with, you want to think about who the players are first. So when we think about the players, it's the company itself. There's also underwriters. And those are usually investment banks, like large investment banks. And those help guide the process.

And then there's regulators. And I'd say regulators-- you think about the SEC. They review filings. And they ensure proper disclosures. And of course, there's always outside legal. And that's the attorneys. All of these folks collaborate to create one of the most important documents in the IPO process. And that's known as the registration statement. This filing includes a preliminary prospectus and provides investors with key information such as company business models, risk factors, and even financial statements.

JIM ARMSTRONG: So you threw a lot of words out there and defined them for us, which is great. Andrew, I want to give you a chance. I know there's some other jargon or some phrases that might come up that we want to define before we get too much deeper.

ANDREW RAKOWSKI: Absolutely. So a couple important ones that come to mind is the offering price, which is commonly referred to as the IPO. So that's what the shares are initially sold for, what price. Then there's, and we're going to talk about how it works at Fidelity, the share allocation. And that's, how are those newly available traded shares distributed amongst investors? And that could be a combination of institutional and retail investors.

And finally is the ticker symbol. So that's the identifier. How do I find this newly traded vehicle once it's trading? And then understanding these basics, they can really help as we get into the process itself.

JIM ARMSTRONG: Excellent. That's so useful. We'll keep shuffling between the theoretical and the tactical/practical throughout the course of the webinar. So Heather, I'll turn to you now. The title of this show is, of course-- it references how to "get in early." So let's start talking more about how an average investor might actually get some exposure and do that.

HEATHER KNIGHT: Sure thing, Jim. Luckily, we don't have to hold back on the cereal anymore. So retail investors-- they can access IPOs through their brokerage or investment firms. And here at Fidelity, it's kind of neat because we periodically participate in select upcoming IPOs. And that gives eligible clients, eligible retail clients, the opportunity to submit requests for shares.

And that's through our platform. Clients can really leverage some of the tools that we have at scale and the technology to actually take part in some of those IPO processes when it's available. And I know that we're going to cover this a little bit later, Jim, in detail. But we do have an IPO calendar on fidelity.com, which will list any and all IPOs that Fidelity is specifically participating in.

JIM ARMSTRONG: Excellent. And you're right. We'll do a nice demonstration of that in just a moment or two. But before we get there, I do want to build on how the IPO process actually works, but specifically here at Fidelity. And I'd love to actually hear from both of you on this process and walk us through it. And Heather, we'll bounce back to you and then see what Andrew has to say.

HEATHER KNIGHT: I think that's great, Jim. So believe it or not, the process actually begins well before trading starts. This is the IPO phase that contains a few steps, such as the company's filing registration documents with the SEC. I mentioned that a little bit before. And that often is typically pretty confidential. That includes detailed financial disclosures through documents like the S-1. So that's where that pre-start, the things that we don't usually see on the table, happen.

ANDREW RAKOWSKI: And I would say that these filings are critically important because they give investors their first real look at-- under the hood of the business. So for the S-1, as an example, you will get detailed information about the financials, revenue model, growth strategy, key risks, et cetera. It's also where investors can start to understand how does the company actually make money and what is the future performance capabilities. It's really about transparency for the market to make sure that as participants, we all have enough information to make an educated decision before the shares are offered.

HEATHER KNIGHT: Spot on, Andrew. And then we move into the beginning of the pricing process. And that's often referred to as the roadshow period. And during that roadshow period, the company executive team, along with underwriters, presents the business potential to investors.

And the price is normally based on factors such as the company's financials. They look at the products and services, income stream as well. And even in addition to that, they take a look at demand for the shares as well as current market conditions. And that's going to be an important one, too, for consideration.

Then the underwriter must determine a fair offering price, which takes into consideration the need for the company to raise that capital we talked about earlier while offering the new issue at a price, which represents a fair value of the shares. And something to be aware of, too, here is that the offering price and/or number of shares issued could be raised or lowered from what was originally described in the preliminary prospectus. Additionally, that offering can be delayed or postponed based on unfavorable market conditions. And we've certainly seen that happen, of course, in our career here at Fidelity.

JIM ARMSTRONG: And so, Heather, it's really after this initial roadshow pricing stage that Fidelity becomes a little bit more directly involved, specifically through, as you mentioned, that share allocation process, right?

HEATHER KNIGHT: Exactly. After the offering price range is determined, that's really when we would step in or be a little bit more visible. This brings us to the next step in the process, which is submitting that indication of interest. That's that initial part of being able to be a part of the new issue.

JIM ARMSTRONG: And that is where I don't need to tell either you or Andrew exactly where a lot of customer questions start to come in because this is their chance to start to express an interest. So let's slow down a little bit and walk through that IOI process step by step.

HEATHER KNIGHT: Absolutely, Jim. And you're right, this step is always the one that drives a ton of curiosity, absolutely generates a lot of questions, and especially around that participation part. So I'll go wide and then bring it down a little bit.

Retail investors can submit what's called, and we said this before, an indication of interest, also known as an IOI. This depends on the specific eligibility requirements of the IPO. And by the way, these different requirements-- they can vary by offering.

So that can make it even more important for us to at least make sure that we're reviewing the details of every single offering that's out there. The IOI simply signals interest. And it does not guarantee allocation. And later on in the process, investors are going to need to confirm that indication of interest as well.

JIM ARMSTRONG: And I want to stop you there if I can, bring Andrew back into the conversation, because I know this is a super common question that we hear from clients all the time. Look, I already made my IOI. I made my indication clear. Why do I have to confirm it?

ANDREW RAKOWSKI: So with Fidelity, with new issue offerings, we-- customers are required to confirm their indication of interest after the effectiveness and pricing. By doing so, when you confirm your indication of interest, you're essentially informing Fidelity that you're interested in placing an order to buy the shares at that specific offering price now that it's been determined.

Customers who confirm that indication of interest are not guaranteed an allocation. I want to make that clear. It's very important. And also, another important part is if a client does not confirm their IOI, or indication of interest, they're not eligible to receive an allocation. So we're going to show you the steps. But it's really critical, that second step.

HEATHER KNIGHT: And to add that, Andrew, I'd say this-- that a-- clients must-- they have to confirm that indication of interest, even after the registration statement has been declared-- even when it's effective, I would say. And that offering usually is priced after 7:00 PM on the night of the pricing-- so 7:00 PM Eastern Time, I believe, that it is. And confirming that indication of interest changes your indication to an order to buy shares at the offer price. That's actually what turns that into, I'm willing-- I'm ready to make that order.

You can confirm or reduce the existing quantity as well. That's important to note, too. So once I get that, I can say, listen, I want to confirm exactly what I originally wanted after seeing that price, I'm good with this, or I can say, maybe I want a little bit less, I want a few more shares. But you can't increase the shares during that confirmation.

So I can't stress this enough. You've heard Andrew say it. I think, Jim, you may have even touched on it. It's really important that you confirm your interest to remain eligible for that allocation of interest that night before. Doing it doesn't guarantee you'll be allocated the shares, either. But it's just certainly the most important part of that to make sure that you stay in the game there.

ANDREW RAKOWSKI: Yep, exactly. And then once the pricing is finalized and the indication of interests are confirmed, then it moves on to the allocation process, which is very heavily impacted by supply and demand dynamics. Understanding that typically, there's a limited supply of shares and balancing that against other market demand is key.

When we think about confirming indication of interest and allocations, I always clarify with clients that there's an allocation of shares that are provided across multiple brokerage firms. Then each of those firms has to divide their allotments to their own clients.

It's not exactly the same, but an analogy. And I know Heather is a big concert-goer, although I'm not-- I don't share the same interest in music. But let's say one of her big heavy metal bands is playing at a local venue that's very popular.

There may be significant demand for tickets. Typically, a big concert venue will distribute those tickets to different platforms or websites. Then each of these platforms will list those tickets on their websites and their allotment of tickets amongst their fans trying to buy them.

Of course, IPOs are a little different. There's other considerations beside, can I buy the tickets the fastest? Is this a band that I really want to go see? Am I familiar with their music? It goes back to the S1. Do some research. Understand what the company is.

JIM ARMSTRONG: Thanks for that. And thanks for helping us unpack a little bit of Heather's backstory. It's fascinating. With that, though, Heather, I'd love it if you could explain a little bit more about what actually determines whether shares get allocated. That's a big, big question.

HEATHER KNIGHT: It is a big question. And actually, the process has a lot to do with the shares that are distributed to investors. So it's important to remember that the underwriter first allocates shares to different institutions, like Andrew touched base on.

Those institutions, such as brokerage firms, then typically distribute those shares amongst their clients. There are all kinds of factors that can affect that allocation at both the brokerage level and the individual investor level. And some of them-- more common factors would include things like the demand for the offering.

So underwriters or large financial institutions like investment banks we're thinking of here-- they evaluate investor interest in the company going public. Particularly, that's usually from the institutional investors to begin with. That demand also helps determine the final offering price, as well, which we touched base on a little bit before. But it also plays a key role in how shares are ultimately distributed. That said, Fidelity's general IPO allocation methodology evaluates customers based on their relationship with Fidelity. So you think about that. Customers are ranked based on their activity across retail accounts, including assets, like total assets held underneath, by the way, individual Social Security number or tax identification numbers.

Revenue is also taken into consideration. What kind of brokerage commissions or mutual fund revenues generated or margin interest, even? These are things that are important to be aware of because the assets and activity also do not include workplace retirement accounts or 401(k)s, and 403(b)s, as well, or accounts, by the way, that are actually managed underneath institutional divisions of Fidelity.

So we exclude that when we're looking at the bigger picture as to eligibility and weighing some of those thoughts before we distribute those out. And also, keep in mind that the allocation method used is really from-- based on the issue we're offering as well. So it's important to note that allocation process is designed, though, to be really fair and equitable, Jim, as possible. We try to do that for all of our clients. It's really important for us, for all those participating investors.

Also, I'm not sure if I touched base on this earlier. But the size of your indication of interest, or your IOI, does not increase your chances of receiving shares. So if you went out and said, I want a ton of them, it doesn't mean that you might actually get allocated because you've asked for a lot more. In addition to that, you might receive only all-- or only some of the shares that you asked for, or you could receive all of them. But you can't oversubscribe or receive more than your original request. And I think that's a safety measure for us, too, once we know that.

We don't want to be surprised the next day and realize that we have a lot more than we had originally thought that we wanted. Maybe I didn't have as many friends to bring to that heavy metal concert that we talked about earlier. But that's why it's important that investors enter that indication of interest only for the number of shares that they're prepared to purchase, since requesting more doesn't really improve any allocation outcomes following that.

JIM ARMSTRONG: Excellent context. So thank you for laying that out. You covered a lot there. But there's actually a little bit more nuance when it comes to allocation, as well, that-- something else that you like to explain to clients during this process.

HEATHER KNIGHT: We sure do, Jim. And other factors include-- and they're not really limited to this, by the way, either-- but overall demand for the IPO, total shares available, allocation decisions made by underwriters. And I think this is one that I'm going to unpack a little bit more here because when we think about an example of that, that would be institutional versus retail and whether or not there's a DSP as part of that offering.

So a DSP, or a Direct Share Program, actually allows a company that's going public to reserve a certain percentage of their public offering to eligible participants. So the company may identify friends or family or employees who are eligible to participate in the DSP, or direct share program. And the rules governing that are a little bit different. The eligibility for participation are really established by the company itself. So that has nothing to do with us. That's part of that method of allocation.

Also, fun fact-- those friends, family, and employees are allocated shares of the direct share program. They actually purchase them at the initial public price. So they're not getting anything special outside of what's actually available for all of us out there.

JIM ARMSTRONG: Andrew, anything else you would add?

ANDREW RAKOWSKI: Timing. Timing is important, Jim. It could be a very narrow window to confirm the participation. And the communication timing can certainly impact outcomes. And we're going to talk how Fidelity's streamlined that for the benefit of our clients.

JIM ARMSTRONG: That would be great. Before we get there, let's go back to that timeline and talk a little bit about the IPO day itself. This is the day that folks have been waiting for. I'm just curious, is it-- does that day look and feel the same way for every company, or is there some more nuance there based on the private company that's gone public? Heather?

HEATHER KNIGHT: So there are some similarities. But at the end of the day, I'd say that there's quite a few differences when we think about-- depending on the company itself. So the day one is actually when shares begin trading itself on the open market.

And that's often, by the way, when the volatility is at its highest. And we've seen that happen plenty of times before. So investors can expect to see some shifts based on demand and broader market sentiment, as well as major price swings, within that first day.

The newly issued IPO shares are generally traded on the secondary market, either New York Stock Exchange or NASDAQ, on the day following pricing night. So that's that day, that first day that we're talking about.

Also, shares-- they don't typically begin trading at the market open. And I think that there are folks that sit and wait and say, when is it going to happen? When are we going to start to see this trading occur? And there's no real set time for that. So that's where that little differentiator is. They trade differently.

So typically, I've seen it actually trade anywhere on day one between 10:00 AM Eastern Time up until 2:00 PM Eastern Time. But each security can vary-- so some similarities, some things that are a little bit different.

It's also important to understand, too, there are lockup periods which restrict insider selling and policies like flipping, which refer to quickly selling IPO shares. Those can all influence, as well, post-IPO price behavior that you might be talking about. Those are some of the differentiators that you could see on day one.

JIM ARMSTRONG: Let's linger, if we can, for a moment on this concept of flipping, Andrew. What do people need to know about that?

ANDREW RAKOWSKI: It's an interesting term, flipping. And it's just like it sounds. So after an IPO begins trading in the secondary market, clients who were allocated shares in the offering are free to sell their shares at any time. Fidelity is not going to restrict you. However, selling allocated shares too quickly can carry some consequences. And that's called flipping. I'm flipping it right after I was allocated it. So with any investment, like I said, you're going to be free to sell the securities whenever you determine it's appropriate. But if you sell those allocated shares within a 15-day calendar window from the start of trading, you will be what's considered a flipper. And that may affect your ability to participate in future new issue offerings through Fidelity for a period of time.

The first day that you would no longer be considered a flipper is the 16th calendar day after the IPO trades, as Heather talked about, depending on that window after pricing. So frequent flipping can potentially-- or not potentially, it would restrict your ability to participate in future IPOs. So if you're a first-time flipper, Jim, you're going to be blocked for six months for your next participation opportunity. If you're a repeat flipper, the second time, you're going to be blocked for an entire year. And if you're really into flipping and you flip a third time, you're going to be permanently banned at the Social Security number level. And there's a reason for this. And it's designed to discourage short-term trading behavior that can disrupt the overall IPO pricing and allocation process.

JIM ARMSTRONG: It makes a lot of sense. So thank you for taking the time to walk us through that. Heather, let's-- again, let's move away from the theoretical and back to the practical. I am almost certain it's the case that people watching us right now are interested in a private company that could go public soon. What do they need to do to get exposure? What are the ways that they can participate in an IPO?

HEATHER KNIGHT: And this-- another question that actually comes up all the time, Jim. There are quite a few paths, actually. So before trading begins, of course, you can utilize that-- Fidelity's IPO process when available. And that's going to require those eligibility requirements being met, of course, and then submitting that indication of interest, or you can proactively enter limit orders, of course, once the symbol is listed or available on the platform as well. So that's that one-- the one way that you can get in.

After the IPO, investors can still buy shares once it begins trading, just like any normal stock. So if you don't get in, that's OK. It's still going to trade. And once it does, you have the ability to do that. You can certainly put in limit orders as well. But you can pretty much buy as you see fit as it's trading. So you can use market limit orders or-- to buy or sell those shares. But remember, I would say that one of the things to consider is, like I said before, there's a lot of volatility. And typically, it's not just on the first day it starts trading. It's actually probably for a couple days, too.

So you might even receive a different execution price than you had expected if you used, let's just say, a market order because market orders guarantee execution, not price. So if you throw out a market order, you're at the whim of that in order to get in. So I'd say monitor that and make sure you know exactly what your price point is to go in, or at least be aware that there could be a really fluctuating price that goes in there.

Another way to gain access, which isn't often talked about, is through indirect exposure. So I would say indirect exposure is more like looking for mutual funds or ETFs and investing in those that may include those newly public companies. I think a lot of us don't typically look at the holdings underneath our exchange-traded funds or our mutual funds. But it's available. You can actually find that information on fidelity.com.

So a lot of times, you may even have exposure or we can get exposure through some of those indirect ways using those funds. So maybe we're not ready to buy that stock once it starts trading. But there are certainly some other ways that you can get exposure, or even looking at thematic purchases, too.

JIM ARMSTRONG: I caught your use of the word "expectation" in that answer, Heather. This is definitely the part of the process where the way I think the world is going to play out and the way it actually plays out can diverge pretty significantly. So it's worth lingering for a second on expectations.

HEATHER KNIGHT: So let me highlight that to you because there are actually a couple misconceptions. So I'll bring it back to reality here. Everybody assumes that IPOs always go up in price and that day one gains-- that would be considered typical. So I can tell you that both Andrew and myself-- we've been working together for quite-- many years, actually, I'd say. And we collectively have about 60 years of industry experience. And we have seen plenty of losses on first-day trading.

So it does happen. So that's one of them. So we don't always assume that it's actually going to go up. In reality, performance is actually going to be really varied. And you're going to see that volatility. That's-- would be something that I'd see is more common, especially early on.

So you think about those misconceptions to bring it back to reality and say, listen, it may not go up tomorrow. It may not go up for three or four weeks, or it may actually stay down. We just don't know. And I think that that's something that you have to be aware of and really accept if it's something that you're interested in pursuing.

JIM ARMSTRONG: And so Andrew, with that prelude there, let's talk a little bit more about potential risks and considerations for someone who is looking at an IPO at the moment.

ANDREW RAKOWSKI: Absolutely, Jim. And I just want to go back to one thing Heather said. 60 years seems like a long time. I think you might be carrying the majority of that.

HEATHER KNIGHT: [LAUGHING]

ANDREW RAKOWSKI: So IPOs-- they can certainly be exciting. But as we discussed, volatility, uncertainty-- and a lot of the reasons make sense if you think about many newly public companies may not have a long track record. They have limited public financial history. The value may be based on future expectations, not trailing earnings, PEG ratios, fundamental terms, et cetera.

In turn, this can lead to that increased volatility that Heather spoke about. So greater risk could certainly be involved with IPO investing than more established investments, not to discourage it, but to be realistic from a portfolio standpoint. When we think about IPOs, they could certainly offer the growth potential.

But again, thinking that they're newer companies, newer to the public markets, typically, and often more volatile, they should be in-- they should be considered within the context of your overall entire portfolio exposure. So sometimes, they may be more appropriate as smaller opportunistic investments, I would say.

JIM ARMSTRONG: And so with that in mind, again, for practical purposes, someone watching right now, what would you suggest are the questions, the types of questions that an investor might want to ask themselves before participating in an IPO?

ANDREW RAKOWSKI: I think they're very similar questions that we should be asking when we're making investments in general. Hey, one, does this align with my risk tolerance? Two, what is my investment time horizon for the investment? How does it impact my overall portfolio? Am I still maintaining diversification? If you don't know the answers to those questions and you're in doubt, it might be helpful to speak with a financial professional just to ensure that making this decision aligns with the overall long-term and broader goals.

JIM ARMSTRONG: Absolutely-- makes a ton of sense. So let's assume someone has asked all of those questions and the answer is, yes, I'm ready to participate, I have done my research, I feel confident in taking the next steps. Andrew, I'm going to turn the reins over to you, more or less, so that you can walk through the research tools and the IPO process here at Fidelity.

ANDREW RAKOWSKI: Absolutely. I'm going to share my screen so we can see how easy it is with the Fidelity platform. So we're logged in to a test account right here. So this would be the Portfolio Summary page when you log into your Fidelity account.

We're going to navigate to News & Research, IPOs, the third choice from the bottom. This will take us to the IPO calendar. So these are the current IPOs that are available for Fidelity clients to submit indications of interest.

This is purely for educational purposes and demonstrations. It's not a recommendation by myself, Heather, Jim, or Fidelity to go out and submit an indication of interest. Today's pretty decent size number of listings. So it changes throughout the day. So this is throughout time, not throughout the day. This is today's current offering.

So as we talked about, step number 1 in the upper right is signing up for IPO alerts. And that will give you the ability to designate an email where you are going to be alerted to, if we hearken back to that process, to be able to confirm your indication of interest.

On the right-hand side of the table, we see the Participate and Prospectus. That's where the actual participation would take place. It does require opening and reviewing the prospectus.

Because I'm logged into a test account, some of the functionality is limited. I'm just scrolling down here because Fidelity has gone ahead and created an article that shows all of us step-by-step instructions. And it was just the first one, "How to participate in an IPO." And I'm just going to scroll through. I'm not going to read through every single text line item.

But we sign up for alerts. We get alerted when there's a new IPO offering on Fidelity. We go to News & Research, IPOs. We can select "Participate" in the offering if we're interested and would like to participate. It's going to give us the option to choose which account that we would like to submit our indication of interest in. And then this step number 4, downloading and reviewing the prospectus, is very important because you must open the prospectus as part of the participation flow. This is a interesting one, Rule 5130/5131. Like I said, I'm not going to read through all of this. But essentially, it's, are you a restricted individual who's not eligible to participate in an IPO? They may be an insider with the company, may have other business dealings, et cetera.

And then it's simple. This hypothetical POSEIDA initial public offering-- we would just enter our indication of interest, our maximum share quantity. To Heather's point, if I really can only afford, or from a risk tolerance standpoint/portfolio impact, 1,000 shares, I'm not putting in for 5,000, thinking that it's going to give me an opportunity to get more shares. It's going to be equally allocated. And then it would just be Preview, 100 shares of the POSEIDA in that range from $14 to $16. At any time on that Calendar home page, you can review your indication of interest. And at that time, you can delete it. If the window has closed, you cannot reenter.

And then on the night of pricing, you can just confirm at that time, to Heather's point. You can reduce your existing quantity. But you cannot increase it. And then you must, as we've touched on a couple times, really important-- you must confirm your interest to remain eligible for an allocation of shares.

Again, it doesn't guarantee that you will be allocated shares.

And then the night of pricing, you'll receive an alert once allocation has occurred. If you were allocated shares, you're going to log into your Fidelity account at the account level, Accounts & Orders. Typically, allocation will occur on the morning following pricing, usually before 9:30 AM. You'll know, A, was I allocated any shares? B, if I was, how many shares did I get? And this is just showing you what that email looks concerning the allocation. So it's really straightforward, very simple. I'm going to stop sharing that now.

As I touched on before, Fidelity is not going to restrict you from selling prior to that 15-day calendar window. But remember that there are ramifications for being deemed a flipper. But I think just that quick demo shows you how simple it is to get signed up, review what's available, do some due diligence, see the preliminary prospectus, and then you're on your way.

JIM ARMSTRONG: I love it. Thank you for taking the time to do that. There are lots of ways to check in and make sure you're making the right progress along the way, too, during that flow. So really, thank you for walking us through it.

As we start to wrap up, I want to hit on a couple of things that stuck out to me. But then I'd love to hear your perspective as well. First, I hear you both loudly and clearly that IPOs can certainly present potential opportunities to people. But they also, obviously, come with risks associated.

Neither access nor allocation is ever guaranteed. And I think maybe for me, the big takeaway is that both research and, as Heather said, realistic expectations are critical, especially as you start and then follow through the rest of this process.

But I'm curious-- I'd just like to ask each of you, if there was one thing that you really wanted to make sure that viewers took away from this webinar, what would that one thing be? And Andrew, we'll start with you.

ANDREW RAKOWSKI: I do not want to discount the excitement that IPOs present. It's an exciting opportunity. But again, as with any investment, we should be taking a step back. How does it fit into my overall financial plan? There's certainly reward potential.

To Heather's point, it's not guaranteed. There's been a number of IPOs that have gone down on-- after pricing. Let's remember that there's real risks that we're taking as investors. And we work hard for our money. So let's think about how we want to use it.

JIM ARMSTRONG: Absolutely. And Heather, how about you?

HEATHER KNIGHT: I'd say Andrew took mine. So I'd say I'd double down. But if I had to add to that, it's really thinking about all the clients that I've worked with over the years. I'd encourage our clients and customers and viewers, actually, to take advantage of the tools that we have. They're constantly being updated. They're easy to use. We just demoed how easy and quick it was, in a matter of minutes, to be able to access that IPO calendar when participating in the IPOs.

And Fidelity works really hard to empower clients to be able to leverage those tools. And I can tell you that even since I've been here, there's been a lot easier to use-- you said two clicks-- really to get into that particular area. So I'd say the tools would be my biggest takeaway. Spend some time on that in addition to the risk management part of it.

JIM ARMSTRONG: That's fantastic. I want to thank you both again for taking time out of your day to walk us through the process-- really, really appreciate your time. Thank you.

ANDREW RAKOWSKI: You're welcome.

HEATHER KNIGHT: Thanks for having us.

JIM ARMSTRONG: As we wrap up, though, I do want to flash on the screen a reference to what Heather was just talking about, as a matter of fact, all of those resources that are available. And this, I would say, is just a sample of the resources that Fidelity makes available. There's a lot of online articles that dive deeper into the various aspects of the IPO process available to everyone watching right now. I think one of this team's personal favorites is the "How to buy an IPO" article. When you check out that article, what you're going to get is, effectively, a step-by-step process that will walk you through how to successfully submit for an IPO. And that will really-- what it's going to do is reinforce the process that Andrew just demoed for us a moment ago.

Also, a pretty common question we get during a presentation like this in, can I get the slides? Yes, you may. The slides that we shared today are available for download. You can download them by clicking on the button just below the video player that says "Download today's slides"-- try to make it as easy as possible for you to do that.

Take those slides if you want them and use them for future reference. And those slides will also, of course, have the links to what you're seeing right now, as well, if you want to take advantage of any of those other educational resources.

And again, that's just a sample of the many educational resources that Fidelity makes available to its customers, again, to help you feel comfortable with this and any investment process as you start to make your investing decisions. We hope you'll check them out. And we'd love to see you again at a future webinar. Until then, take care.