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An initial public offering, or IPO, is when a private company becomes a public company by offering shares on a securities exchange such as the New York Stock Exchange or NASDAQ. Private companies go public for a variety of reasons: maximizing shareholder value; providing liquidity to investors and employees; raising capital to reinvest and grow business; and using stock as a currency for mergers and acquisitions.
On occasion, TD Ameritrade will act as a member of the selling group for IPOs. When we do, we can offer qualified accounts the opportunity to participate. When we aren't, we can still offer you the opportunity to pursue investing in a company entering the market once it goes public. Once you open and fund an account, you can purchase a recently listed stock on the secondary market, as long as you decide it fits with your strategy.
Investing in an IPO
How to buy IPOs
Here's how you can get in on an IPO when TD Ameritrade is a member of a selling group:
- Not yet a client? Call 800-454-9272 or open an account.
- Already a client? Log in to your account and select IPOs from the Trade tab, or call 866-678-7233 for assistance.
Once the company goes public, and its stocks begin trading on the secondary market, you can buy and sell them just as you would any other stock that you decide is right for you.
What you should know about IPOs
Participating in a new IPO through TD Ameritrade allows you to purchase stock at the IPO price. The IPO price is determined by the investment banks hired by the company going public. If you meet eligibility requirements and TD Ameritrade is participating in the IPO you are interested in, you can place a conditional offer to buy. Be sure to read the preliminary prospectus prior to submitting a conditional offer to buy in a new IPO. Placing a conditional offer to buy does not mean that you will receive shares of the IPO.
It is important to note that your ability to obtain shares of any new issue security may be significantly limited because overall demand for the IPO may far exceed the actual supply of shares coming to market. After the IPO has been issued, shares will begin trading on the market shortly thereafter. Most investors will be able to access those shares more readily.
TD Ameritrade generally begins accepting COBs (Conditional Offers to Buy) one week prior to expected pricing date. Depending on where the IPO prices, it may be necessary to reaffirm your Conditional Offer to Buy. Allocations are based on a scoring methodology. If you receive an allocation, the shares will post to your account the morning the IPO is expected to trade on the exchange.
Get answers to the most frequently asked questions about participating in an IPO when TD Ameritrade acts as a member of the selling group.
What are the eligibility requirements to trade IPOs?
What is the account funding process for IPOs?
What are the risks and requirements involved with trading IPOs?
Stay up to date on the latest IPO news with TD Ameritrade Network* and The Ticker Tape. Here are a few suggested articles and videos about IPOs:
*TD Ameritrade Network is brought to you by TD Ameritrade Media Productions Company. TD Ameritrade Media Productions Company and TD Ameritrade, Inc. are separate but affiliated subsidiaries of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of The Charles Schwab Corporation. TD Ameritrade Media Productions Company is not a financial advisor, registered investment advisor, broker-dealer, or futures commission merchant.
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