In order to participate online in a new issue offering made available through Fidelity Brokerage Services LLC and W.R. Hambrecht's OpenIPO process, customers must:
Meet Fidelity's Auction or IPO Eligibility Requirements
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.
Sign up for Fidelity Alerts
In order to be notified regarding IPO shares through Fidelity Brokerage Services LLC, customer must register with the IPO notification service of Fidelity Alerts for the purpose of receiving notification of deal effectiveness, pricing, the confirmation period, allocation of shares and other deal updates.
Fidelity Alerts is a service provided by Fidelity Investments which allows customers to receive IPO notifications, as well as other account or trade related information, via pager, email, two way pager, or personal data assistant (i.e., Palm Pilot™).
Customers may sign up for IPO notifications via Fidelity alerts in one of two ways:
Select "Download a Prospectus" from the IPOs page of the "Research" tab. If the customer has not previously registered, customer will be prompted to follow the instructions to do so once the customer clicks "Download a Prospectus." After following the instructions, the customer will be registered to receive these notifications through Fidelity Alerts.
Alternatively, customers may select the Fidelity alerts link from the IPOs page of the Research tab of Fidelity.com. Customers may log in and select "Manage Your Delivery Address" from the table of contents to enroll with a method of communication (e.g., email). Then under "Investment Ideas" select Sign Up next to "New and Secondary Offerings/IPOs". Then on the right side of the screen select "Set Alert" for "IPOs", then choose the device to deliver the alert and select "Save". This will send all new and secondary issue updates including participation announcements to the registered device.
*Notice to all IPO participants: check regularly for deal updates. Deal update notifications such as an update that there has been a change in the expected price range or an offering has priced outside the expected price range as well as other material changes to the offering should be carefully reviewed. All change notifications to the offering will be communicated to the customer via the device the customer registered with Fidelity Alerts.
Customers must provide responses to certain qualification questions
FINRA Rule 5130 prohibits "restricted persons" (certain persons associated with the financial services industry) from participating in the purchase of new issue offerings. Customers must provide responses to a series of questions annually to determine if they are "restricted persons" under the Interpretation.
Summary of the OpenIPO Process
The OpenIPO auction is based on a model similar to that used to auction US Treasury bills, notes, and bonds. Bids are entered with a limit price, representing the maximum price each customer is willing to pay per share. Based on a number of economic and business factors, including customers' bid prices, the underwriter and the issuer will establish the public offering price. All customers who have entered bids with limit prices at or above the offering price, will be allocated either a pro-rated number of shares rounded to the nearest 100 or all of their indicated shares at the offering price. In certain circumstances, you may be required to confirm your bid. If this occurs, we will send an email to the email account you registered when you signed up for Fidelity Alerts. If you fail to confirm your bid when requested, your bid will no longer be valid and you will not receive an allocation of shares.. Please note that submitting a bid does not guarantee that you will be allocated any shares in the offering.
Please Note -unless we notify you to the contrary - a confirmation of your bid is not required, and if you do not withdraw or revoke your bid, your bid may be accepted in whole, in part, or not at all by the underwriters soon after the registration statement for the offering is declared effective.
For more information, please see the Plan of Distribution section of the applicable prospectus and the Frequently Asked Questions about OpenIPOs.
Review Preliminary Prospectus
Customers should review the preliminary prospectus prior to entering an bid. The preliminary prospectus can be downloaded by selecting the "Download a Prospectus" link under the IPOs link of the "Research" tab. The preliminary prospectus contains information about the offering that the issuer and underwriter have determined that an investor should read in order to make an informed investment decision.
Enter Bid
In order to have an opportunity to participate in an offering made available through the OpenIPO process, customers must enter a bid. The bid should contain the maximum price and number of shares the customer is interested in purchasing of the offering. The limit price the customer enters with his bid will be submitted to the underwriter along with other bids by customers interested in participating in the offering. A price range is provided in the prospectus for each offering based on an estimate by the underwriter. However, you can enter a limit price for whatever price you believe that the shares are worth. In submitting a bid, it must contain a minimum of 100 shares and cannot exceed 1000 shares per account, per offering. Bids may be rejected by the underwriter in order to maintain a bona fide distribution to public shareholders. The securities may not be sold nor may bids be accepted prior to the time that the registration statement is declared effective.
In certain circumstances, you may be required to confirm your bid. If this occurs, we will send an email to the email account you registered when you signed up for Fidelity Alerts. If you fail to confirm your bid when requested, your bid will no longer be valid and you will not receive an allocation of shares. Please note that submitting a bid does not guarantee that you will be allocated any shares in the offering.
Please note -If it appears that a bid is intended to manipulate the offering or may interfere with the underwriter's ability to complete a bona fide distribution, W.R. Hambrecht reserves the right to reject it. This may include extraordinarily high or unrealistically priced bids.
Customers should also keep in mind that they should submit bids only for the amount of shares and at a limit price they are comfortable owning the shares, as they may receive a full allocation at that price and they would need to pay for these shares in full by settlement.
Notification of Expected Date of Effectiveness
Two days prior to the expected date of effectiveness, customers will receive a notification indicating the proposed date the registration statement will be declared effective. The notification also informs customers that auction will close shortly after effectiveness. Customers are informed that they should review their bid, as once the auction is closed they will not be able to adjust or cancel their bid. Also, unless there is a material event to the offering customers do not need to confirm their bid, so if they don't take action they may receive shares of the offering. The auction can close as soon as one hour after the notice of effectiveness is sent. This notification will be sent to customers via the device that the customer registered for when they signed up for Fidelity Alerts.
Deal Effectiveness of the Offering
It is anticipated that the SEC will declare the issuer's registration statement effective in the afternoon on the day of pricing, usually after 1:00 pm ET. Once the registration statement is declared effective, the auction may close as soon as one hour after effectiveness is declared. In certain circumstances, you may be required to confirm your bid. If this occurs, we will send an email to the email account you registered when you signed up for Fidelity Alerts. If you fail to confirm your bid when requested, your bid will no longer be valid and you will not receive an allocation of shares.. Please note that submitting a bid does not guarantee that you will be allocated any shares in the offering.
Please Note -unless we notify you to the contrary - a confirmation of your bid is not required, and if you do not withdraw or revoke your bid, your bid may be accepted in whole, in part, or not at all by the underwriters soon after the offering is declared effective.
Notification of Deal Effectiveness
After the registration statement for the offering is declared to be effective, customers will receive a notification that: 1) the offering has been declared effective, 2) if customer does not want to purchase shares, they must withdraw any bid prior to auction close, which may occur as soon as one hour after the deal is declared effective. This notification will be sent to the customer via the device that the customer registered for when they signed up for Fidelity Alerts.
Pricing of the Offering
After the auction closes, the underwriter will establish the clearing price. The clearing price is calculated by tallying all the confirmed indications received, ranking them from highest price to lowest price, and beginning with the highest price, identifying the highest price level at which all of the registered shares would be sold.
Once the clearing price is determined, the underwriter and the issuer will establish the public offering price after taking a number of economic and business factors into account in addition to the clearing price. Please note that, in any particular offering under the OpenIPO auction process, the clearing price and the public offering price may be different.*
*Based on negotiations between the underwriter and the issuer, the public offering price may be lower, but will not be higher, than the clearing price. Keep in mind that the allocation of shares is always determined by the offering price.
Please note note that if it is determined (after effectiveness) that an offering is going to price outside the expected price range by a material amount (material amount percentage is defined in the plan of distribution section of the preliminary prospectus), a notification will be sent to customers with the new pricing information. Upon receiving the notification, all eligible customers must reconfirm their indications of interest to remain eligible to participate in the offering. Customers may cancel their bid or reduce tha amount of shares requested up until the close of the auction.
Allocation of Shares
Once the offering price is set, customer bids can be accepted. The allocation of shares through the OpenIPO process will be determined by the limit price submitted with the customer's bid. All customers who submitted bids at or above the public offering price will be allocated either a pro-rated number of shares rounded to the nearest 100 or all of indicated shares. If the customer's limit price is below the offering price of the issue, the customer will not be allocated shares.
Please note: The Underwriter reserves the right at its discretion to modify the allocation methodology at any time. For further information regarding the allocation methodology, please read the plan of distribution in the preliminary prospectus.
Notification of Allocation
Customers will receive a notification that the offering has been priced and allocations have been placed in customer accounts. Customers are instructed to check their accounts on Fidelity.com to verify if they received an allocation. This notification will be sent to the customer via the device that the customer registered for when they signed up for Fidelity Alerts.
Delivery of Confirmation and Final Prospectus
Customers who are allocated shares in the offering will receive a written confirmation and a copy of the issuer's final prospectus. The final prospectus contains the same type of information included in a preliminary prospectus and certain amendments, including, but not limited to, the exact number of shares offered, the net proceeds going to the issuer, and the concession being given to the underwriter.
Holding Period
As with any investment, customers are free to sell the securities obtained during an IPO whenever they determine it is appropriate for them. However, if customers sell within the first 15 calendar days from the start of trading in the secondary market, it will affect their ability to participate in new issue equity public offerings through Fidelity by not being considered eligible to participate (or place indications of interests or bids) in future offerings 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 within first 15 calendar days of the security trading in the secondary market they will be prevented from participating in IPO process for 180 days. The second time customer sells shares of an IPO obtained through Fidelity within 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 within first 15 calendar day they will be prevented from participating in IPO process permanently.
The venture capital affiliates of Fidelity Investments hold an equity investment of less than 5% in W.R. Hambrecht.
