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Recent ipos to look at7/30/2023 ![]() Since "hot" IPOs are in high demand, underwriters usually offer those shares to their most valued clients. ![]() It is unclear how "hot" the offering will be until close to the time when the shares start trading. The excess demand can only be satisfied once trading in the IPO shares begins. When an IPO is "hot," appealing to many investors, the demand for the securities far exceeds the supply of shares. Underwriters believe that institutional and wealthy investors are better able to buy large blocks of IPO shares, assume the financial risk, and hold the investment for the long term. Most underwriters target institutional or wealthy investors in IPO distributions. The underwriters in consultation with the company decide on the basic terms and structure of the offering well before trading starts, including the percentage of shares going to institutions and to individual investors. Moreover, syndicate members themselves do not receive equal allocations of securities for sale to their clients. Only a limited number of broker-dealers are invited into the syndicate as underwriters and some of them may not have individual investors as clients. The IPOs of all but the smallest of companies are usually offered to the public through an "underwriting syndicate," a group of underwriters who agree to purchase the shares from the issuer and then sell the shares to investors. While smaller or individual investors are finding it easier to buy IPO shares through online brokerage firms, they may still find it difficult to buy IPO shares for a number of reasons: The Underwriting Process The SEC does not regulate the business decision of how IPO shares are allocated. They have wide latitude in allocating IPO shares. The underwriters and the company that issues the shares control the IPO process. The Laws That Govern the Securities Industry.Researching the Federal Securities Laws Through the SEC Website. ![]()
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