Participating in an IPO, also known as initial public offering, is a unique investment opportunity that can offer significant returns. In order to be considered for investing in an IPO, you must have been given the opportunity from the company itself or from a broker-dealer. The advantage of investing in an IPO is that it allows investors to buy shares of stock at a discounted price and then reap the benefits when the company's share price goes up and they sell their shares at a profit.

Investors agree to acquire stock at the offering price before it starts trading on a secondary market when they take part in an initial public offering. When it comes to pricing an offering, the lead underwriter consults with the issuer and other stakeholders to establish what the offering price should be. To invest in an IPO, first check to see whether your brokerage business provides access to new issue stock offerings, and if so, what the conditions are. Experienced traders and investors with a greater net worth are more likely to be qualified for an IPO. Demand generally surpasses supply in an IPO, making it difficult for individual investors to get shares.

For this reason, many brokerage companies restrict who may participate in IPOs by requiring clients to have a considerable amount of assets with the company, to achieve particular trading frequency standards, or to have maintained a long-term connection with the business. If you've done your homework and have been assigned shares in an IPO, you should know that while you are free to sell shares obtained through an IPO whenever you see fit, many firms will restrict your eligibility to participate in future offerings if you sell within the first few days of trading. Read more. Flipping is the practice of swiftly selling initial public offerings (IPO) shares, and most brokerage houses forbid it.

An IPO, or Initial Public Offering, is a process in which equity ownership in a company is sold to the public for the first time. A company that has an IPO is known as an “IPO candidate” and seeks out an underwriter, or investment bank, to serve as a lead bank for the IPO. The investment bank will help identify the number of shares of stock to offer and provide advice on pricing.