How to Invest in IPOs

It's the buzz phrase of the new century - "IPO," the initial public offering of a private company's first public stock sale. Because of the publicized success of a few, many investors see IPO investments as a way to get ahead in the market.

Difficulty: Moderately challenging

Instructions

Things You'll Need:

• Internet Access
• Computers
• Wall Street Journal
• Brokerage Accounts

1. Find the S-1 registration statement on file with the Securities and Exchange Commission. Generally, you will be able to find the statement at Free Edgar (see freeedgar.com).

2. Read the section about underwriters, and note which brokerage firms are participating in the IPO.

3. Call the brokerage firms and tell them that you will consider setting up an account with one of them if that firm will let you buy stock in the IPO.

4. Be prepared for rejection. Most brokers let only their top clients buy into an IPO.

5. Find out whether online discount brokers are playing a distributor role in the IPO. If so, they may be willing to let you buy shares if you will establish an account.

6. Open the account.

7. Tell the broker how much you plan to invest in the IPO.

8. Keep an eye on Web sites as the expected offering date nears. You will learn the price range in which the company plans to sell shares and the date the offering is expected to take place.

Tips & Warnings

• Hang onto your stock for at least 60 days after the offering. Brokers get angry with people who "flip" a stock - buy it in an IPO and sell it immediately for a quick profit. They may not let you in on the next IPO in which they participate.