How to Buy an IPO Before It Goes Public

by Frank Nagy ; Updated July 27, 2017

According to Hoovers.com, which tracks companies that have recently filed with the SEC to go public, 89 initial public stock offerings were filed with the Securities and Exchange Commission during the first three quarters of 2011. The advantage to buying at an IPO before it goes public is to get in at a fixed share price. Once the offering is made public on the exchanges, the stock can rise or fall according to demand.

Step 1

Find the S-1 registration statement the company filed with the Securities and Exchange Commission at freeedgar.com. Companies must file an S-1 with the SEC when going public. It contains information about board members, business of the company, any pending lawsuits and audited financials.

Step 2

Read the S-1 registration carefully, and focus on the underwriters involved in the IPO process. These lead firms are the broker dealers that develop the offering and promote the stock to the public.

Step 3

Call the broker dealer firm and indicate you are interested in buying into the IPO. In most cases, you will need to open an account with the broker dealer. In addition to basic information about yourself, you will be required to attest to the broker dealer that you are aware of the risks involved with investing in IPOs and that you have experience with stock trading.

Step 4

Advise your broker how many shares you wish to purchase in the IPO. Your broker will then provide you wiring instructions to purchase the stock. Go to your bank and complete an outgoing wire transfer form naming the broker dealer as beneficiary. Indicate your account number that the dealer had provided you so that your funds will be credited to the proper investment account.

Warnings

  • Not all IPOs make money. Supply and demand and how much the broker dealer markets the stock will help determine how successful the IPO launch will be.

About the Author

Frank Nagy started writing articles relating to business finance in 2010. His articles have been published on VentureCapitalResources.com and Business.com. Nagy's career in banking and finance began in 1998 when he obtained his mortgage broker license and launched Frank Nagy Financial Services.

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