In order to participate online in a new issue offering through Fidelity Brokerage Services LLC, a customer must:
Meet eligibility requirements
Fidelity Brokerage Services provides access to a broad range of Initial Public Offerings (IPOs) for eligible brokerage customers. We are able to provide this service thanks to our relationships with investment banks that underwrite IPOs and allocate some shares to Fidelity.
The lead underwriters allocate the vast majority of IPO shares to institutions like pension funds and mutual funds. Only a small percentage of any IPO is allocated to retail investors. Fidelity acquires shares through investment banks participating in the offering and makes these shares available to eligible customers who attempt to participate in the offering.
At Fidelity, we strive to allocate all IPO shares as fairly as possible. But particularly in popular IPOs we can't always meet customer demand.
Eligibility for participation in new issue equity offerings through Fidelity is defined as follows:
- IPOs in which Fidelity might receive allocations through our relationship with Deutsche Bank and other underwriters are reserved for brokerage customers with a minimum of $500,000 in certain assets held at Fidelity.
- Follow-on and Secondary offerings made available through all of our relationships are reserved for brokerage customers with a minimum of $100,000 in certain assets held at Fidelity.
- IPOs and follow-on offerings led by Kohlberg Kravis Roberts & Co. (KKR) are reserved for brokerage customers with a minimum of $100,000 in certain assets 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 IPO, Follow-on and Secondary offerings.
Asset and 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 Investments Institutional Operations 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 eligible for IPO shares through Fidelity Brokerage Services LLC, customers 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 e-mail and wireless device.
Customers may sign up for IPO notifications via Fidelity Alerts in one of two ways:
First, customers may select "Download a Prospectus" from the IPOs page of the Research tab of Fidelity.com. If the customer has not previously registered he/she will be prompted to do so once the customer clicks "Download a Prospectus". Customers will then be registered for Fidelity Alerts.
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:Customers should check their Fidelity Alerts device regularly for deal updates. Deal updates such as an update that 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 via the device the customer registered with Fidelity Alerts.
Customers must provide responses to certain qualification questions
FINRA rules prohibit "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.
Review a preliminary prospectus
Customers should review the preliminary prospectus prior to entering an indication of interest. The preliminary prospectus can be easily downloaded by selecting the "Download a Prospectus" link on the IPOs page of the Research tab of Fidelity.com. The preliminary prospectus contains information about the offering and issuer that the underwriter and issuer have decided an investor should have in order to make an informed investment decision.
Enter an indication of interest
In order to have the opportunity to participate in an offering, customers must submit an Indication of Interest (IOI) to Fidelity. Fidelity may receive only a very small percentage of an overall offering, which means very few Fidelity customers may receive an allocation, particularly when demand for shares is significant. Submitting an IOI for an offering does not entitle you to receive an allocation of shares. Please be aware that the size of your IOI indicates the maximum number of shares you are interested in purchasing. The size of your IOI will not otherwise influence the number of shares you may receive in an IPO.
Notice of Expected Date of Effectiveness
The morning of the expected date of pricing, customers will receive a notification that the offering may go effective shortly. The notification informs them that in order to participate they must confirm their indication of interest after they receive a notification of effectiveness and pricing, and that if they confirm their indication of interest, they may withdraw their confirmed indication at any time prior to allocation which will occur soon after deal effectiveness and pricing. This notification will be sent to the device that the customers registered for when they signed up for Fidelity Alerts.
Deal Effectiveness and Pricing of the offering
Customers will receive a notification that: 1) the offering has been declared effective and priced 2) in order to have an opportunity to purchase shares, they must confirm their indication of interest by a stated time, and 3) if they do not want to purchase shares they must withdraw any confirmed indication prior to allocation, which will not occur prior to a stated time. This notification will be sent to the device that the customer registered for when they signed up for Fidelity Alerts.
Post-effective Confirmation of indication of interest
In order to have an opportunity to participate, customers must confirm their indication of interest. Indications of interest may not be confirmed prior to the registration statement being declared effective and the shares being priced. By confirming their indication of interest, customers are placing an order to buy.
Note:Customers who do not confirm their indications of interest after effectiveness and pricing will not be allocated shares of the offering.
Allocation of shares
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 (SSN). Each customer who submits an Indication of Interest (IOI) in an IPO offering is evaluated and ranked based on their assets, revenue, and tenure with Fidelity. Assets include all retail assets associated with an individual's SSN/TIN but do not include assets associated with your employer's workplace savings plan, such as a 401(k) or 403(b) or asset held with Fidelity's Family Office Services. Revenue consists of the brokerage commissions, margin interest, and mutual fund revenue generated in retail accounts associated with your SSN. Tenure refers to the length of time you have been a Fidelity client, determined by the date of the first retail account opening. Accounts or assets associated with your employer's workplace savings plan or held with Fidelity's Family Office Services are not included in this calculation. The allocation methodology is managed as fairly and as equitably as possible. The size of an Indication of Interest is not considered during allocation, other than the fact that we will not allocate more shares than you have requested. Therefore, you should only enter an Indication of Interest for the number of shares in which you are interested in purchasing, as entering a larger number will not help you receive additional shares and may result in your being allocated all the shares you requested.
Allocation Notification
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 device that the customer registered for when they signed up for Fidelity Alerts.
Receive the final prospectus
Customers who are allocated shares of the offering will receive a copy of a written confirmation accompanied by 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 for a defined period of time.
The defined period of time that a customer will be prevented from participating depends on how many times they 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.
