Q: 2019 is shaping up to be a busy year for big IPOs, with both Uber and Pinterest recently announcing theirs. Can I, as a smaller investor, get shares at the IPO price?
Many financial advisors -- myself included -- generally caution investors to stay away from initial public offerings (IPOs). Most IPOs don't perform well over their first few years as public companies, and that's especially true for some of the trendiest IPOs of recent years. Just ask anyone who got in on the IPOs of Fitbit, Snap, or GoPro how happy they are with their investment's performance.
Check out the latest earnings call transcripts for the companies we cover.
Having said that, if you definitely want to invest in a certain IPO, here's a quick rundown of the process.
First off, you need to have an account with a broker who offers access to the IPO in question. And, generally speaking, you'll need to meet some sort of eligibility requirement, such as a certain minimum balance or level of trading activity.
If you're eligible for the IPO you want to buy shares in, you'll have to "offer" to buy a specific number of shares at a maximum price. IPOs generally state expected price ranges but won't price until the evening before they start trading.
For example, let's say that a certain IPO is expected to price between $15 and $17, so you might offer to buy 500 shares at a maximum of $16.
After you place your order and the IPO prices, you will find out if you were able to buy shares. If there was more interest in the IPO than there were shares available, you may get fewer shares than you offered to buy. If the IPO ends up pricing above your maximum offer price, you won't be given any.
In short, IPO investing is quite an uncertain process until the morning the stock actually starts trading publicly.
