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IPO FAQS



  • What is an Initial Public Offering (IPO)?

    An initial public offering, or IPO, is the first time a company sells its stock to the public. A company may choose to engage in an IPO primarily to raise capital. If the company has never issued equity to the public, it's known as an IPO.
  • Can I participate in IPOs at TradeKing?

    No. TradeKing does not offer direct access to IPOs. Normally, the only way to receive shares in an IPO allocation is to have an account with an investment bank that is a member of the underwriting syndicate. Even then, shares are usually reserved for their large institutional clients. This is likely the case at all discount brokerages.
  • What price will the IPO trade at once it begins trading on the secondary market?

    While the offering price of the IPO may give some indication, the price may be much different than the price of the IPO, once it begins trading on the secondary market. Usually after a period of market price discovery, a stock will establish a trading range and volatility will commonly decrease.
  • Does TradeKing have specific policies regarding what types of orders may be placed for IPOs?

    Yes. As a measure to help protect our clients, TradeKing will only allow limit orders on the day the IPO is expected to begin trading. Because of the inherent volatility of IPOs, market orders will not be accepted and margin may not be used. Only after the stock has undergone a period of price discovery and exhibits an established trading range will TradeKing review and, at its discretion, reduce order and/or margin requirements. Additionally, only cleared funds will be available to purchase recent IPO stocks.
  • When will options be available for trading on a recent IPO?

    Each exchange has its own process to determine if and when options will be listed to begin trading. In the case of a highly anticipated IPO, this may be as soon as a week but can be longer depending on each individual IPO.
  • Can I short sell an IPO?

    Yes, but only if shares are available to borrow. In many cases recent IPOs have a small number of outstanding shares, which can make it difficult for brokerages to locate shares to borrow (especially if it is a highly anticipated IPO). Additionally, borrowed shares may have a high hard to borrow fee in which case TradeKing may not accept orders to sell short.
  • When can I place a trade for an IPO at TradeKing?

    TradeKing will allow limit orders on the day the IPO is expected to begin trading. Orders would be eligible for execution once the stock begins trading in the secondary market.