| |
|
| A. |
An Initial Public Offering (IPO) is the process of a company first selling its shares to the public. These shares are initially issued in the Primary Market at an offering price determined by the lead underwriter. |
|
| The Primary Market consists of a syndicate of investment banks and broker dealers that the lead underwriter assembles and that allocate shares to institutional and individual investors. Being allocated shares at the Offering Price is referred to as participating in the IPO. Participation in the IPO happens before the security is first traded on any of the stock markets. |
|
| Top |
| |
|
| A. |
A company goes public to raise capital for financing business plans, capital expenditures, and growth opportunities. When a company intends to go public: |
| |
|
| • |
|
The company picks a lead underwriter to help with the securities registration process and the distribution of the shares. |
|
| |
The company must develop a preliminary prospectus that includes information on the management team, the company's target market, competitors, all financial data for the company, and the expected price range and number of shares to be issued. |
|
| |
The lead underwriter files a registration statement on behalf of the issuing company with the SEC. The company must typically wait a minimum of 20 days for the SEC to review the registration statement. |
|
| • |
|
The SEC reviews the statement and preliminary prospectus to determine if the issuer meets legal and regulatory requirements. However, the SEC neither approves nor disapproves the issue itself, it only clears the issue for sale. |
|
| • |
|
During the SEC review process, the lead underwriter assembles a group of other investment banks and broker dealers to become members of the underwriting syndicate. |
|
| • |
|
After the registration statement is filed and preliminary prospectuses are distributed, the underwriting syndicate and selling group members act as a distribution channel by recording indications of interest in the IPO on the part of institutional and individual investors. |
|
| • |
|
After the SEC declares the registration statement effective and the offering price has been determined, the selling group members are able to accept the confirmed indications of interest and begin the share allocation process. |
|
|
| Top |
| |
|
| A. |
The lead underwriter sets the offering price on a new issue typically on the evening of the day when the SEC declares the registration statement effective. |
|
| Once the registration is declared effective and the offering price has been set, confirmations of indications of interest can begin. |
|
| Top |
| |
|
| A. |
The price is normally based on such factors as the company's financials, products and services, income stream, as well as the demand for the shares and current market conditions. |
|
| The underwriter must determine a fair offering price which takes into consideration the need for the company to raise capital while offering the new issue at a price which represents a fair value of the shares. |
|
| The offering price and/or number of shares issued could be raised or lowered from what is described in the preliminary prospectus. Additionally, the offering can be delayed or postponed based on unfavorable market conditions. |
|
| Top |
| |
|
| A. |
Typically, the day following pricing is the first day that the new security will trade on the secondary market (i.e., NYSE, Nasdaq or AMEX). |
|
| Top |
| |
|
| A. |
Fidelity brokerage customers can be notified automatically of new issues available through Fidelity: |
| |
|
| • |
|
Via one or two-way pager, e-mail, or via personal data assistant after signing up for Fidelity Alerts. Fidelity Alerts is a free service that can be accessed at Research > Alerts. |
| • |
|
Via the calendar on Fidelity.com. |
| • |
|
Via the calendar on prompt one of the New Issue phone number, 800-544-5631. |
|
|
| Top |
| |
|
| A. |
Eligibility for participation in traditional IPOs led by Kohlberg Kravis Roberts & Co. (KKR) is reserved for brokerage customers with a minimum of $100,000 in certain assets at Fidelity. Other providers of traditional IPOs, and other equity public offerings made through Fidelity may be reserved for brokerage customers with a minimum of $100,000 or $500,000 in certain assets at Fidelity. Auction OpenIPOs and Secondary offerings made available through Fidelity are reserved for brokerage customers with a minimum of $100,000 in certain assets held at Fidelity. Members of Premium Services or customers who have placed 36 or more stock, fixed income, or option trades in a rolling 12-month period are eligible for either traditional or auction based offerings. |
|
| The $500,000 or $100,000 requirement and 36 trade thresholds will be determined weekly by aggregating all assets and trades in retail accounts which list the same name and Social Security number and are maintained by Fidelity Service Company, Inc. or Fidelity Brokerage Services LLC (excluding assets or trades maintained on behalf of any divisions of Fidelity Investments Institutional Services Company, such as 401(k) or 403(b) plan assets). Other assets may be included in the calculation at our discretion. In addition, an account in which an indication of interest is entered must have at least $2,000 in cash or fully paid securities. |
|
| Top |
| |
|
| A. |
Customers who wish to participate in equity new issue offerings through Fidelity must: |
| |
|
| • |
|
Meet Fidelity's eligibility requirements. |
| • |
|
Answer a series of questions to determine if they are qualified investors per FINRA (Financial Industry Regulatory Authority). |
| • |
|
Review the preliminary prospectus by selecting Download Prospectus from the IPOs page of the Research tab of Fidelity.com. |
| • |
|
After the items mentioned above have been satisfied, customers may enter an indication of interest. The indication of interest provides Fidelity with the maximum number of shares a customer is interested in purchasing. |
| |
Call Fidelity to confirm their indication of interest on the confirmation date, which is after effectiveness and pricing date (the actual date will be disclosed to customers when they place their indication of interest). |
|
| |
By confirming their indication of interest, customers are placing an order to buy shares at the offering price. Customers who have confirmed their indication of interest are eligible to receive an allocation of shares. |
|
| |
Confirming an indication of interest does not guarantee an allocation of shares in an offering available through Fidelity. Fidelity reserves the right to accept or refuse any indication of interest. |
|
| |
Note: Customers must confirm their indication of interest to be eligible for an allocation of shares (for more information on allocation, please see How does Fidelity allocate shares?). |
|
|
| Top |
| |
|
| A. |
Customers can review, download, or print a copy of the preliminary prospectus by selecting Download Prospectus from the Research tab of Fidelity.com. |
|
| Top |
| |
|
| A. |
Once pricing and allocation has been completed, you will be able to determine how much cash or cash available is needed to settle the purchase of the new offering. Settlement on a new issue varies by the issuer, but is typically trade date plus 3 business days. |
|
| Once pricing and allocation has been completed, you will be able to determine how much cash or cash available is needed to settle the purchase of the new offering. Settlement on a new issue varies by the issuer, but is typically trade date plus 3 business days. |
|
| Top |
| |
|
| A. |
With new issue offerings through Fidelity Investments, customers must confirm their indication of interest after effectiveness and pricing. By confirming your indication of interest you are informing Fidelity that you are interested in placing an order to buy shares at the offering price. Customers who confirm their indication of interest are not guaranteed an allocation of shares. Customers who do not confirm their indications of interest are not eligible to receive an allocation of shares. |
|
| Top |
| |
|
| A. |
You may increase your indication of interest up through the close of the indication of interest period.
You may decrease or cancel an indication of interest until share allocation takes place. Once share allocation takes place, your indication may not be cancelled or modified. |
|
| Top |
| |
|
| A. |
You can receive automated pricing notification via pager, email, fax, or via personal data assistant after signing up for Fidelity Alerts. Fidelity Alerts is a free service that can be accessed at Research > Alerts. |
|
| Customers can view the status of allocations to their individual accounts on Fidelity.com or by using the Fidelity Automated Services Telephone (FAST®) as soon as shares are allocated, typically the morning following pricing. |
|
| Top |
| |
|
| A. |
Fidelity’s allocation methodology and IPO system were designed to evaluate customers based on their relationship with Fidelity as defined by their Social Security number. Each customer who participates in an IPO offering is evaluated and ranked based on the assets and revenue they have in accounts under their SSN. Assets include all retail assets under the individual's SSN/TIN and exclude assets or trades maintained on behalf of any divisions of Fidelity Investments Institutional Services Company, such as 401(k) or 403(b) plan assets. Revenue is comprised of the brokerage commissions, margin interest and mutual fund revenue generated in retail accounts of the individual's SSN. The allocation methodology is done as fairly and equitably as possible. The size of a customer's indication of interest is not considered during allocation other than the fact that we will not allocate more than the customer requested. Therefore, you should only enter an indication of interest for the amount of shares you are interested in purchasing as entering a larger number will not help you receive additional shares and there is always the possibility that you could be allocated everything you ask for. |
|
| Top |
| |
|
| A. |
As with any investment, you are free to sell the securities obtained during an IPO whenever you determine it is appropriate for you. However, if you sell within the first 15 calendar days from the start of trading in the secondary market, it will affect your ability to participate in new issue equity public offerings through Fidelity for a defined period of time. |
|
| The defined period of time which you will be prevented from participating depends on how many times you have flipped shares in the past and a breakdown of those "exclusion" periods are listed below: |
| |
|
| • |
|
The first time customer sells shares of an IPO obtained through Fidelity in first 15 calendar day they will be prevented from participating in IPO process for 180 days. |
| • |
|
The second time customer sells shares of an IPO obtained through Fidelity in first 15 calendar day they will be prevented from participating in IPO process for 365 days. |
| • |
|
The third time customer sells shares of an IPO obtained through Fidelity in first 15 calendar day they will be prevented from participating in IPO process permanently. |
|
|
| Top |
