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 NADSAQ. 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.
Have you been hearing about the Spotify direct listing in the news? Visit our DPOs (Direct Public Offerings) page to learn more about direct listings and how they differ from IPOs.
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If you are not yet a client and wish to apply to purchase shares of newly issued stock available through TD Ameritrade please call 800-454-9272 or open your account.
If you are a current TD Ameritrade investor and would like to purchase an IPO, log into your account and select IPOs from the Trade tab, or call 866-678-7233 for assistance.
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.
Eligibility requirements
To purchase IPO shares, you must open an account with TD Ameritrade, then complete a personal and financial profile, and read and agree to the rules and regulations affecting new issue investing. Each account being registered must have a value of at least $250,000, or have completed 30 trades in the last 3 months. Accounts must also meet certain eligibility requirements with respect to investment objectives and financial status. Your eligibility information will be validated each time you want to purchase an IPO. You must complete and submit an IPO Eligibility Form in accordance with FINRA Rule 5130 before you can be deemed eligible to participate.
For more information, contact us at 866-678-7233.
Funding your account
You may fund your account via a wire transfer for funds to be immediately available. Electronic funding can be used to purchase IPO stocks 3 business days after the deposit settlement date. Typically at TD Ameritrade shares of recently IPO’d stocks trading in the secondary market are not marginable for some time after the IPO.
Be sure to read the prospectus before investing in an IPO.
Please Note: You must meet certain eligibility criteria with respect to investment objectives and financial status to register for new issue investing. TD Ameritrade is not endorsing any particular investment by making it available. IPOs may not be suitable for all investors. You must determine whether a particular security is consistent with your investment objectives, risk tolerance and financial situation. IPOs are non-marginable for the first 30 days.
