Although many people may think of tech startups going public, many of the most successful IPOs occurred in other industries. For example, General Motors raised $20.1 billion after its IPO in 2010, the largest IPO in history for any American company. Of course, an IPO can be quite lucrative for investors who manage to buy in early. Just how do you buy IPO stock?
Once a company goes public, anyone can purchase or sell stock like they would from any other company. However, there are limited shares available, which is one of the reasons why so many investors clamor for a piece of the pie. This is why investors want to be ready with their mouse or phone in hand as soon as the market opens.
Institutional investors may be more likely to buy stock from the investment bank or broker-dealer that initially provided the company with its startup capital and now has control of the shares. The bank or dealers will try to offload large shares to bigger investors. Although, smaller investors that have accounts with those brokers may be able to get their hands on a few shares before they sell out.
Furthermore, employees of the company going public as well as friends and family of those people within the company may be offered a guaranteed chance to invest at IPO. The company may also offer shares to certain high-value clients in exchange for their patronage.
All of this can lead to quite the price jump in just a single day, so investors who do not manage to buy shares early on may have to pay much more than they bargained for later in the day. However, just because a company’s IPO does well doesn’t mean that the stock will stay high. Sometimes stocks see a drastic fall on the second day when investors are no longer in a frenzy to purchase shares.
For investors who are interested in IPOs, another method to consider is investing in mutual funds such as the Global IPO Plus Aftermarket by Renaissance Capital that includes IPOs to increase the probability of buying IPO stock.