Important legal information about the email you will be sending. By using this service, you agree to input your real email address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an email. All information you provide will be used by Fidelity solely for the purpose of sending the email on your behalf. The subject line of the email you send will be "Fidelity.com: "
An initial public offering (IPO) is the process of a company first selling its shares to the public. These shares are initially issued in the primary market at an offering price determined by the lead underwriter.
The primary market consists of a syndicate of investment banks and broker dealers that the lead underwriter assembles and that allocate shares to institutional and individual investors. Being allocated shares at the offering price is referred to as participating in the IPO. Participation in the IPO happens before the security is first traded on any of the stock markets.
Eligibility for participation in traditional IPOs led by Kohlberg Kravis Roberts & Co. (KKR) is reserved for brokerage customers with a minimum of $100,000 in certain assets at Fidelity. Other providers of traditional IPOs, and other equity public offerings made through Fidelity may be reserved for brokerage customers with a minimum of $100,000 or $500,000 in certain assets at Fidelity. Auction OpenIPOs and secondary offerings made available through Fidelity are reserved for brokerage customers with a minimum of $100,000 in certain assets held at Fidelity. Members of Premium Services or customers who have placed 36 or more stock, fixed income, or options trades in a rolling 12-month period are eligible for either traditional or auction based offerings.
The $500,000 or $100,000 requirement and 36 trade thresholds will be determined weekly by aggregating all assets and trades in retail accounts which list the same name and Social Security number and are maintained by Fidelity Service Company, Inc. or Fidelity Brokerage Services LLC (excluding assets or trades maintained on behalf of any divisions of Fidelity Investments Institutional Services Company, such as 401(k) or 403(b) plan assets). Other assets may be included in the calculation at our discretion. In addition, an account in which an indication of interest is entered must have at least $2,000 in cash or fully paid securities.
Regulations governing IPOs state that new issues are not marginable for at least 30 days following pricing. Therefore, IPO shares must be paid for using cash or cash available to borrow.
Once pricing and allocation have been completed, you will be able to determine how much cash or cash available is needed to settle the purchase of the new offering. Settlement on a new issue varies by the issuer, but is typically the trade date plus three business days.
Fidelity eligibility rules require $2,000 in any account from which an IPO bid is entered.
You can receive automated pricing notification via email, text message, or Fidelity Mobile® after signing up for free Fidelity Alerts.
Customers can view the status of allocations to their individual accounts on Fidelity.com or by using the Fidelity Automated Services Telephone (FAST®) as soon as shares are allocated, typically the morning following pricing.
As with any investment, you are free to sell the securities obtained during an IPO whenever you determine it is appropriate for you. However, if you sell within the first 15 calendar days from the start of trading in the secondary market, it will affect your ability to participate in new issue equity public offerings through Fidelity for a defined period of time.
You will be prevented from participating in the IPO process if you are considered a flipper. The defined period of time which you will be prevented from participating depends on how many times you have flipped shares in the past:
As a Fidelity customer, there are four fundamental differences between participating in an OpenIPO and the traditional process:
A company goes public to raise capital for financing business plans, capital expenditures, and growth opportunities. When a company intends to go public:
Once the registration is declared effective and the offering price has been set, confirmations of indications of interest can begin.
The price is normally based on such factors as the company’s financials, products and services, income stream, as well as the demand for the shares and current market conditions.
The underwriter must determine a fair offering price which takes into consideration the need for the company to raise capital while offering the new issue at a price which represents a fair value of the shares.
The offering price and/or number of shares issued could be raised or lowered from what is described in the preliminary prospectus. Additionally, the offering can be delayed or postponed based on unfavorable market conditions.
Typically, the day following pricing is the first day that the new security will trade on the secondary market (i.e., NYSE, Nasdaq or AMEX).
Fidelity’s allocation methodology and IPO system were designed to evaluate customers based on their relationship with Fidelity as defined by their Social Security number (SSN) or taxpayer identification number (TIN). Each customer who participates in an IPO offering is evaluated and ranked based on the assets and revenue they have in accounts under their SSN. Assets include all retail assets under the individual’s SSN/TIN and exclude assets or trades maintained on behalf of any divisions of Fidelity Investments Institutional Services Company, such as 401(k) or 403(b) plan assets. Revenue is comprised of the brokerage commissions, margin interest and mutual fund revenue generated in retail accounts of the individual’s SSN. The allocation methodology is done as fairly and equitably as possible. The size of a customer’s indication of interest is not considered during allocation other than the fact that we will not allocate more than the customer requested. Therefore, you should only enter an indication of interest for the amount of shares you are interested in purchasing, as entering a larger number will not help you receive additional shares and there is always the possibility that you could be allocated everything you ask for.
W.R. Hambrecht & Co. (WRH & Co.) is an investment banking firm formed in February 1998. In addition to operating OpenIPO, the firm is engaged in the business of public and private equity investing, financial advisory services, research, and market making. WRH & Co.’s founder, William R. Hambrecht, has 40 years of experience in the securities industry and was also the founder, chairman, and CEO of Hambrecht & Quist.
Note: The venture capital affiliates of Fidelity Investments hold an equity investment of less than 5% in W.R. Hambrecht.
The OpenIPO auction is based on a model similar to that used to auction U.S. Treasury bills, notes, and bonds. Bids are entered with a limit price, representing the maximum price each investor is willing to pay per share.
Shortly after the SEC declares the issuer’s registration statement effective, the auction will close and the underwriter will establish the clearing price. The clearing price is established by tallying all the bids received, ranking them from highest price to lowest price, and beginning with the highest price, identifying the price level at which all of the shares can be sold.
Once the clearing price is determined, the underwriter and issuer will establish the public offering price, i.e., the price per share customers will pay for securities. In any particular offering under the auction process, the clearing price and the public offering price may be different. Based on negotiations between the underwriter and the issuer, the public offering price may be lower, but will not be higher, than the clearing price. Keep in mind that the allocation of shares will be determined by the public offering price, not the clearing price.
Once the offering price is set, the customer’s bids can be accepted. The allocation of shares through the OpenIPO process will be determined by the limit price submitted with the customer’s bid. All customers who submitted bids at or above the public offering price will be allocated either a prorated number of shares rounded to the nearest 100 or all of indicated shares. If the customer’s limit price is below the offering price of the issue, the customer will not be allocated shares.
In certain circumstances, you may be required to confirm your bid. If this occurs, we will send an email to the email account you registered when you signed up for Fidelity Alerts. If you fail to confirm your bid when requested, your bid will no longer be valid and you will not receive an allocation of shares. Please note that submitting a bid does not guarantee that you will be allocated any shares in the offering.
Note: Unless we notify you to the contrary, a confirmation of your bid is not required, and if you do not withdraw or revoke your bid, your bid may be accepted in whole, in part, or not at all by the underwriters soon after the offering is declared effective.
For more information, please see the Plan of Distribution section of the applicable prospectus.
The anticipated price range that is contained in the preliminary prospectus is the price at which the issuer expects to sell its stock. This price range is determined by the issuer and underwriter. This price range is an estimate and is only a guide.
You should avoid bidding a higher price than you wish to pay or bidding for more shares than you wish to purchase in the belief that the offering price and/or your pro rata allocation will be at a price you are willing to pay and/or in an amount you are willing to purchase.
In the event that the expected price range is changed prior to effectiveness, you will be notified of the new range. Under these circumstances, the issuer and underwriter will amend the registration statement and provide investors a prospectus which will reflect, among other things, the new expected price range. If the deal is priced outside of the expected range by a material amount (material amount percentage is defined in the plan of distribution section of the preliminary prospectus), you will be required to confirm your bid in order to remain eligible to purchase shares in the offering. At the time of confirmation, and anytime up until the close of the auction you will have the opportunity to change or cancel your limit price or reduce the amount of shares of your bid.
Once the clearing price has been determined, the offering price will be set and all customers who have entered a bid with a limit price at or above the offering price will receive a prorated allocation rounded to the nearest 100 at the offering price regardless of what their limit price was.
Note: If it appears that a bid is intended to manipulate the offering or may interfere with its completion, W.R. Hambrecht reserves the right to reject it. This includes extraordinarily high or unrealistic bids.
Customers should also keep in mind that they should bid for the amount of shares at a price they are willing to purchase the issue as there is the possibility that they receive a full allocation at that price and they would need to pay for these shares in full by settlement.
Customers may enter only one bid per account per IPO, per offering.
You may modify, change, or cancel your bid up until the auction closes. The auction will close as soon as one hour after the registration statement of the offering is declared effective. After the auction closes, you may not change your limit price or quantity of shares requested.
After the auction closes, the underwriter will establish the clearing price. The clearing price is calculated by tallying all the confirmed indications received, ranking them from highest price to lowest price, and beginning with the highest price, identifying the highest price level at which all of the registered shares would be sold.
Once the clearing price is determined, the underwriter and the issuer will establish the public offering price after taking a number of economic and business factors into account in addition to the clearing price. Please note that, in any particular offering under the OpenIPO auction process, the clearing price and the public offering price may be different.*
*Based on negotiations between the underwriter and the issuer, the public offering price may be lower, but will not be higher, than the clearing price. Keep in mind that the allocation of shares is always determined by the offering price.
Note: If it is determined (after effectiveness) that an offering is going to price outside the expected price range by a material amount (material amount percentage is defined in the Plan of Distribution section of the preliminary prospectus), a notification will be sent to customers with the new pricing information. Upon receiving the notification, all eligible customers must reconfirm their indications of interest to remain eligible to participate in the offering. Customers may cancel their bid or reduce the amount of shares requested up until the close of the auction.
Once the offering price is set, customer bids can be accepted. The allocation of shares through the OpenIPO process will be determined by the limit price submitted with the customer’s bid. All customers who submitted bids at or above the public offering price will be allocated either a prorated number of shares rounded to the nearest 100 or all of the indicated shares. If the customer’s limit price is below the offering price of the issue, the customer will not be allocated shares.
Note: The underwriter reserves the right at its discretion to modify the allocation methodology at any time. For further information regarding the allocation methodology, please read the Plan of Distribution in the preliminary prospectus.
The pro rata percentage will be determined by dividing the number of shares available for sale by the number of shares bid for at the offering price and above. For example: if 4 million shares are being offered by the issuer and there are 5 million shares of demand at and above the offering price, then all bidders will receive 80% of the shares for which they bid rounded to the nearest 100.
Note: The underwriter reserves the right at its discretion to modify the allocation methodology at any time. For further information regarding the allocation methodology, please read the plan of distribution in the preliminary prospectus.
If you’re interested in participating in a new issue equity:
With new issue offerings through Fidelity Investments, customers must confirm their indication of interest after effectiveness and pricing. By confirming your indication of interest you are informing Fidelity that you are interested in placing an order to buy shares at the offering price. Customers who confirm their indication of interest are not guaranteed an allocation of shares. Customers who do not confirm their indications of interest are not eligible to receive an allocation of shares.
You may increase your indication of interest up through the close of the indication of interest period. You may decrease or cancel an indication of interest until share allocation takes place. Once share allocation takes place, your indication may not be canceled or modified.
Securities and Exchange Commission, a federal government agency that regulates and supervises the securities industry; the commission administers federal laws, formulates and enforces rules to protect against malpractice, and seeks to ensure that companies provide full disclosure to investors
the amount of stock in an initial public offering (IPO) that is sold to a customer
additional registration document that is filed by the issuer with the SEC that has additional information regarding the proposed offering for that company
underwriter who, among other things, is in charge of organizing the syndicate, distributing member participation shares, and making stabilizing transactions; the lead underwriter’s name appears on the left side of a prospectus cover
price for which a new security issue will be sold to the public; also known as “issue price”
offering document printed by the issuer containing a description of the business, discussion of strategy, presentation of historical financial statements, explanation of recent financial results, management and their backgrounds and ownership; the preliminary prospectus has red lettering down the left-hand side of the front cover and is sometimes called the “red herring”
price range at which the company expects to sell its stock in a public offering; also referred to as “offering range”
procedure by which a company who would like to go public files a registration statement with the SEC which contains a description of the company, its management, and its financials; the material is reviewed by the SEC for its completeness, amount of disclosure, and its presentation of accounting information before the SEC declares the registration effective, which allows it to be traded to the public
public sale of previously issued securities held by large investors, usually corporations or institutions
investor who has acquired shares of an IPO at its offering price and sells it immediately—which Fidelity currently defines as within 15 calendar days following pricing
group of broker/dealers that helps an underwriting syndicate distribute securities of a public offering
Build your investment knowledge with this collection of training videos, articles, and expert opinions.
There are risks associated with investing in a public offering, including unproven management, and established companies that may have substantial debt. As such, they may not be appropriate for every investor. Customers should read the offering prospectus carefully, and make their own determination of whether an investment in the offering is consistent with their investment objectives, financial situation, and risk tolerance.