Top brokerage firms to buy IPO stocks. Best stock brokers for investing in IPOs.

Buying IPOs on Webull

If you have a Webull account you may be excited to learn that they just recently expanded their investment offerings to include initial public offerings (IPOs). This is a nice addition and will give Webull investors greater access to young companies that is restricted or unavailable to everyday investors on many other brokerages. This article will go over investing in IPOs and how to do it in Webull.

What is an IPO?

Simply put, an IPO is when a private company becomes public by offering ownership in itself (i.e. shares) to the investing public. Most, but not all, private companies are smaller, younger, and less-established than their public counterparts. Often early stage ventures, these companies are mostly initially funded by venture capital firms that specifically invest in start-ups. Many start-ups fail, making investing in these companies risky, but for the handful of start-ups that succeed and grow the rewards to investors can more than make up for the failures.

During an IPO, generally a large portion of the private company is offered for sale by the majority owners (often founders and the venture capital firms). This allows the founders and venture capital investors to “cash out” on a successful investment and also allows the broader public and institutional investors an opportunity to invest in the company’s next stage of growth.

How Does Webull Offer Shares in IPOs?

Every IPO has what’s called an underwriter, which is an investment bank that determines what the appropriate price should be for an IPO based on demand and then sells the company’s shares to interested brokers, such as Webull, who then turn around and offer the shares to their clients if they are interested. That is how a new public company is born, and after its IPO day its shares trade on the market between buyers and sellers just like any other public stock.

WeBull Promotion

Get FREE stock between $8 and $1000 when you deposit $100+ at WeBull.

Open WeBull Account

How to Buy IPO Shares on Webull

The below screenshot is taken from Webull’s website and explains how to find upcoming IPOs that are available on Webull. After selecting “Calendar” from the main menu, adjust the filter to select only IPO and then choose the region from which you would like to view IPOs.


WeBull Buy IPO


When buying shares of an IPO you will tell Webull how many shares you would like, and you will have to pay whatever the IPO price is set at for your shares.


WeBull Buy IPO


What Are the Risks of Buying IPOs?

The biggest risk in buying an IPO that you don’t have to deal with when investing in companies that have been public for a while is the risk that the IPO price was set higher than the market believes the company is worth. Underwriters do their best to estimate the appropriate IPO price based on supply and demand but it is in their best interest to set the price as high as they can, because after all their compensation is often linked to the amount of proceeds they can bring in for the IPO company’s owners.

If the underwriters priced an IPO too high, like was done during Facebook’s IPO, the price could fall sharply in the months following the IPO as the market forces find the appropriate price based on supply and demand. Companies that have been public for a while do not have this risk as their stock prices have had the benefit of years or natural price discovery in the markets.

WeBull Promotion

Get FREE stock between $8 and $1000 when you deposit $100+ at WeBull.

Open WeBull Account


Webull

Continue Reading