How is the max share price used by the broker when a customer indicates interest for an IPO?
How is the max share price used by the broker when a customer indicates interest for an IPO?
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Franck Dernoncourt · External communityPost link
External question — Personal Finance Stack Exchange
Author: Franck Dernoncourt
Original post: https://money.stackexchange.com/questions/169700
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
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Some brokers allow their customers to specify a max share price when indicate interest for an IPO. Examples of such brokers: Robinhood and E-Trade. Examples of brokers who don't let customers specify a max share price: Charles Schwab and Fidelity (or maybe that depends on the IPO?).
How is the max share price used by the broker when a customer indicates interest for an IPO?
Example of a max share price on E-Trade:
Example of a max share price on Robinhood:
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Ellie K · External communityPost link
External answer — Personal Finance Stack Exchange
Author: Ellie K
Original post: https://money.stackexchange.com/a/169707
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
Adaptation: HTML converted to plain text; contact email addresses removed.
There is a standardized process used for buying shares as part of an IPO. First, the investor needs to satisfy eligibility requirements. That varies depending on whom you're buying your shares from, i.e. the syndicate (they are the brokers and investment banks working with the underwriter, and sell IPO shares to their customers).
If the investor satisfies those eligibility criteria, they can indicate interest in buying a fixed amount of shares as part of the IPO. The brokerage will allocate that number of shares or fewer (or none at all), depending on demand and the number of shares being sold by that brokerage.
On the preliminary prospectus, the price is listed as a range. The (final) offering price can be less or more than that. The pricing is based on the underwriter's assessment of the company's value and other factors specific to the company. It is the underwriter who determines the offering price (which is set when the shares are registered with the SEC, usually the night before the IPO) not the syndicate members or other brokers, nor investors.
Any customer who participates in the IPO and is allocated shares in the offering will purchase shares
at the public offering price
, i.e.
at the IPO price, not more or less than that price
.
You must confirm your indication of interest after the registration
statement has been declared effective and the offering has been priced
(usually after 7:00 p.m. ET on the night of pricing). Confirming an
indication changes your indication to an order to buy shares at the
offer price.
If a customer expresses interest in purchasing shares, then confirms that interest once the final price is decided upon, AND the customer is allocated shares, the customer MUST buy the number of shares allocated at the price specified. It is a binding agreement.
See section 9
:
Allocation will occur on the morning following pricing and is usually
complete before 9:30 a.m. ET... Your account will be debited for the
purchase [at the IPO price] if you receive an allocation.
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Franck Dernoncourt · External communityPost link
External answer — Personal Finance Stack Exchange
Author: Franck Dernoncourt
Original post: https://money.stackexchange.com/a/169712
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
Adaptation: HTML converted to plain text; contact email addresses removed.
Some brokers such as E-Trade and Robinhood allow their customers to put a max share price when indicating interest to participate in the IPO before shares start trading on the secondary market. The max share price is used to automatically confirm interest in the IPO.
For example, Robinhood sends that message once the IPO price is finalized:
Robinhood [13:26]. SPCX finalized its price. Your initial public offering (IPO) request max price of [redacted] per share will be automatically confirmed with no further action required. Confirmation of a valid order is not a guarantee of allocation.
and E-Trade sends that message once the IPO price is finalized:
The registration statement for the public offering of Space Exploration Technologies Corp. (SPCX) has been declared effective by the SEC. You've submitted a conditional offer to buy (COB) securities in this offering.
If you'd like to modify or cancel your COB, you can do so through the
New Issue Center
during the offering's withdrawal time, which has now begun and will last for at least an hour after the time this alert was sent.
If you do not withdraw your COB, E*TRADE may accept it after the withdrawal time and allocate shares to you. Please note, however, that placing a COB does not guarantee that shares will be allocated to you.
If you are receiving this alert by email or text, please do not reply as your message will not reach us. You can get answers to a variety of questions by visiting the New Issue Center, linked above.
whereas Charles Schwab and Fidelity, which don't let user specify a max share price, ask to customers to confirm they want to participate in the IPO once the price is finalized.
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Quoted from Forex.com.bd-Editorial External answer — Personal Finance Stack Exchange Author: Ellie K Source score (net votes, not local likes): 2 Original post: https://money.stackexchange.com/a/169707 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. There is a standardized process used for buying shares as part of an IPO. First, the investor needs to satisfy eligibility requirements. That varies depending on whom you're buying your shares from, i.e. the syndicate (they are the brokers and investment banks working with the underwriter, and sell IPO shares to their customers). If the investor satisfies those eligibility criteria, they can indicate interest in buying a fixed amount of shares as part of the IPO. The brokerage will allocate that number of shares or fewer (or none at all), depending on demand and the number of shares being sold by that brokerage. On the preliminary prospectus, the price is listed as a range. The (final) offering price can be less or more than that. The pricing is based on the underwriter's assessment of the company's value and other factors specific to the company. It is the underwriter who determines the offering price (which is set when the shares are registered with the SEC, usually the night before the IPO) not the syndicate members or other brokers, nor investors. Any customer who participates in the IPO and is allocated shares in the offering will purchase shares at the public offering price , i.e. at the IPO price, not more or less than that price . You must confirm your indication of interest after the registration statement has been declared effective and the offering has been priced (usually after 7:00 p.m. ET on the night of pricing). Confirming an indication changes your indication to an order to buy shares at the offer price. If a customer expresses interest in purchasing shares, then confirms that interest once the final price is decided upon, AND the customer is allocated shares, the customer MUST buy the number of shares allocated at the price specified. It is a binding agreement. See section 9 : Allocation will occur on the morning following pricing and is usually complete before 9:30 a.m. ET... Your account will be debited for the purchase [at the IPO price] if you receive an allocation.
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