*Note: Primary market IPO trading is not available with us
If a company’s IPO has a lot of public interest, we may offer a 'grey market'1 before the IPO takes place. This will allow you to make a prediction on the company’s estimated market cap at the end of its first day of trading. The price that we quote for a grey market offering will be based on our prediction of the company’s market cap at the end of its first trading day.
- You’ll ‘buy’ (go long) if you think the company’s market cap will be higher than the price we quote
- You’ll ‘sell’ (go short) if you think the company’s market cap will be lower than the price we quote
Secondary market: buying the stock after the IPO – buying or trading
To invest in the secondary market, you’ll need a share trading account. Investing allows you to buy and sell the stock. To trade on the secondary market, you’ll use CFDs. With this leveraged product, you won’t own the shares when you trade, but you’ll be able to speculate on the share price whether it goes up or down. Note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please consider the Margin Trading Product Disclosure Statement (PDS), Risk Disclosure Notice and Target Market Determination before entering into any CFD transaction with us.
With us, you can take a position on the secondary market for UK IPOs as soon as it opens – which is usually at 8am (UK time) on the day of the IPO. US IPOs might take a few hours to be available to traders, which is the case for all brokers.
Make sure you always have an effective risk management strategy in place when trading an IPO, as the share price could experience increased volatility right after the listing.
Learn how IPOs work
The IPO process starts long before the shares list on an exchange. First, a company has to make the decision to go public. This is followed by a financial audit of the business and a registration process. The news of an upcoming IPO will usually be released a few months before the planned listing – which gives you time to study a company’s fundamentals and decide whether you want to take a position on its shares.
Choose an IPO to trade
There are hundreds of UK, US and international IPOs every year. Find out more about upcoming IPOs or sign up to our exclusive mailing list to find new IPO stocks. By subscribing, you'll receive updates on any changes to expected IPOs, as well as the latest news on upcoming listings.
Register your interest for IPO news
Build your IPO trading plan and strategy
A good trading plan and risk management strategy will provide guidance on how to find opportunities, and when to take profits and cut losses. There are several ways you can minimise your risk, which include attaching stops to your positions. Stops will close your trade at a certain level if the market moves against you, minimising your losses.
To learn more about trade planning and risk management, join IG Academy. It’s a great tool for developing your knowledge on all things trading, with free online courses, webinars and seminars.
IPO trading and investing strategies
We’ve highlighted some IPO trading or investing strategies below. Remember that before using any of these strategies, you should take steps to manage your risk.
- Check the price discovery on day one
- Wait for the lock-up period to end
- ‘Buy’ or ‘sell’ the IPO stock with derivatives
- Open your first IPO position
Check the price discovery on day one
Taking a position on an IPO on its opening day can be very different compared to other market opportunities. Support and resistance levels haven’t been established yet and people are often excited with certain expectations. One of the best ways to handle hot IPOs is to wait for the morning volatility to cool off and allow the stock to establish some ‘price discovery‘.
This will give you levels to trade off and price action will likely be less erratic and volatile. Having levels to trade off helps you manage risk, which is your number one goal when trading an IPO. Placing hard stops and managing trade size is a must.
Wait for the lock-up period to end
IPO shares are often subject to a ‘lock-up’ period. These can last up to six months and mean that existing shareholders cannot sell their shares immediately after a listing. If you notice that they are holding on to shares after this period, it could mean that shareholders think there is potential for growth and it’s time to buy because the share price could remain stable or increase.
But, if the share price falls after the lock-up period, it could indicate that confidence in the company is low. This could be an opportunity to go short with derivatives like CFDs.
Following this strategy means that you’ll miss out on the initial market volatility that IPOs often cause – which could be a good or a bad thing, depending on your individual appetite for risk. There’s no saying that you can’t combine these strategies. For example, you might choose to buy and hold some shares from the primary market and wait for the lock-up period to end, but you could also trade the secondary market volatility with derivatives like CFDs on the day of the IPO.
‘Buy’ or ‘sell’ the IPO stock with derivatives
If you want to capitalise on upward and downward movements in a company’s share price on the day of its IPO, you could take a position with derivatives like CFDs. You can use these products to ‘buy’ (go long) if you think the company’s share price will rise, or ‘sell’ (go short) if you think it’ll fall.
But, bear in mind that CFDs are leveraged products, and leverage can increase both your profits and your losses.
Open your first IPO position
Once you’re ready to start trading or buying shares, you can open your first IPO position. Remember that there are a variety of ways to take a position with us – including trading before or after the IPO with our range of accounts and offerings.
Before you open your IPO position, make sure you take steps to manage your risk like adding stops and limits to your open positions, and by monitoring your positions closely.
Can I make money trading initial public offerings (IPOs)?
Yes, you can make money trading initial public offerings if you correctly predict share price movements using CFDs. 10. With us, you can get exposure to the IPO before the listing by trading CFDs on the predicted market cap with our grey market, or after the IPO by taking a position on the company’s share price. You could also profit from an IPO if you buy shares outright after it’s listed via share trading and the share price goes up.
What are the ways you can trade an IPO?
You can trade an IPO before the listing and after the listing. If there is a lot of interest in a particular IPO, IG may offer a ‘grey market’ before the IPO is held. The grey market price will be based on our prediction of the company’s market capitalisation at the end of the first trading day. Once the company has listed, you can take a position on share price movements via CFD trading, or you can buy shares outright via share trading.
How long before you can sell IPO shares?
IPO shares – the shares acquired by investors before the listing – are often subject to a ‘lock-up’ period. These can last up to six months and mean that private investors who held shares prior to the IPO cannot sell their shares immediately after a listing. However, the general public won’t be affected by lock-up periods, as they exist mainly to prevent those who acquired shares before an IPO from immediately selling the stock.
1We do not offer grey markets on all IPOs.
2 Note for multi-currency accounts: These figures apply to clients who opt for the default setting of 'instant currency conversion'. Clients who choose to convert currencies manually will pay commission of 2 cents per share with a minimum charge of $10 on US stocks and, for European markets, we charge £10 / €10 per trade or 0.1%, whichever is higher. Other fees and charges may apply, please refer to share trading charges and fees page.
3 Place three trades in the previous month to qualify.