Canadian Ipos: Fidelity's Investment Opportunities And Strategies

Investing in an IPO can be a risky but rewarding move. IPOs, or Initial Public Offerings, are the process by which private companies, often start-ups, offer shares to the public for the first time. This presents a unique opportunity for individual investors to buy shares at the offering price before they begin trading on the secondary market. However, it is important to remember that IPO stocks tend to underperform the market for several years after going public.

If you are interested in investing in a Canadian IPO through Fidelity, there are a few steps you need to take. First, you need to meet the eligibility requirements, which include having at least $100,000 in certain assets at Fidelity and being a Premium or Private Client Group customer. You also need to sign up for Fidelity IPO Alerts to stay informed about new offerings. Once you have found an offering you are interested in, you can follow the steps outlined on the Fidelity website, which include downloading and reviewing the prospectus, answering qualification questions, and entering your indication of interest. It is important to note that you may not always receive the number of shares you request, and there are restrictions on selling your shares within the first 15 calendar days of trading if you want to maintain your eligibility to participate in future IPOs.

Eligibility requirements for participation

To be eligible to participate in an IPO on Fidelity, you must meet at least one of the following requirements:

Asset Criteria

• $100,000 in household assets (excluding institutional or annuity assets such as 401(k), 403(b), and annuity contracts) to participate in traditional IPOs sponsored by KKR, follow-on offerings, and secondary offerings.
• $500,000 in household assets (with the same exclusions) to participate in IPOs accessed through strategic relationships with multiple underwriters.

Account Relationship

• Be a Fidelity Private Client Group® customer.
• Be a Premium or Private Client Group customer.

Trade Criteria

Participate in one of the following services: Fidelity Private Client Group®, Premium Services.

Other Requirements

• Answer a series of qualifying questions before you can participate in the IPO. FINRA rules prohibit "restricted persons" (certain persons associated with the financial services industry) from participating in the purchase of new issue offerings.
• Have at least $2,000 in cash or fully paid securities in the account you use to enter an indication of interest.

How to participate

To participate in an IPO on Fidelity, you must first meet the eligibility requirements. For traditional IPOs led by Kohlberg Kravis Roberts & Co. (KKR), you must have a minimum of $100,000 in certain assets at Fidelity. For other traditional IPOs and equity public offerings, you need a minimum of $100,000 or $500,000 in certain assets at Fidelity. Members of Premium Services are also eligible.

Next, sign up for Fidelity IPO Alerts to be notified when new offerings are available. You can also view upcoming offerings on the IPO calendar.

Once you've found an IPO you're interested in, follow these steps:

• Select "Participate" for the offering.
• Select the account you want to use and then click "Next Step."
• Download and review the prospectus.
• Answer the Rule 5130 / 5131 qualification questions.
• Enter your indication of interest, which lets Fidelity know the maximum number of shares you want to buy.
• Review your indication of interest on the Indications of Interest tab of the Calendar page. You can modify or delete your indication of interest here.
• Confirm your indication of interest on the night of pricing. You must confirm to remain eligible for an allocation of shares, but this does not guarantee you will receive any.
• You will receive an alert once allocation has occurred. Check your account to see if you were allocated any shares.

Note that you must have at least $2,000 in cash or fully paid securities in the account you use to enter an indication of interest.

Risks and rules

Before investing in an IPO, it is important to understand the risks and rules associated with this type of investment. IPOs are considered speculative and risky investments and may not be appropriate for every investor. There are risks associated with investing in a public offering, including unproven management, and established companies that may have substantial debt. As such, customers should carefully read the offering prospectus and make their own determination of whether an investment in the offering is consistent with their investment objectives, financial situation, and risk tolerance.

In addition, there is no guarantee that a stock will continue to trade at or above its initial offering price once it starts trading on a public stock exchange. IPO stocks tend to underperform the market for several years after they go public since the losers outnumber the biggest winners. It is also worth noting that not all customers who request to participate in an IPO may have the opportunity to do so. In IPO deals where demand exceeds supply, an allocation method based on a formula using a customer's assets, revenue, and tenure may be used.

To be eligible to participate in an IPO through Fidelity, customers must meet specific requirements. These include having at least $100,000 in certain assets at Fidelity and being a member of Premium Services. The $500,000 or $100,000 requirement is determined weekly by aggregating all assets and trades in retail accounts with the same name and Social Security number. Institutional assets, such as annuities, 401(k), or 403(b) plan assets, are excluded from these eligibility requirements.

Furthermore, customers must confirm their indication of interest after effectiveness and pricing. This confirms their interest in placing an order to buy shares at the offering price. It is important to note that confirming an indication of interest does not guarantee an allocation of shares. Customers who do not confirm their indications of interest are not eligible to receive an allocation.

Another rule to be aware of is that if you sell your shares within the first 15 calendar days from the start of trading in the secondary market, it will affect your ability to participate in new issue equity public offerings through Fidelity for a defined period of time. The defined period of time depends on how many times you have flipped shares in the past: first time - 180 days, second time - 365 days, and third time - permanent ban from participating in the IPO process.

Lastly, it is important to do your due diligence before investing in an IPO. This can be challenging due to the lack of readily available public information on a company issuing stock for the first time. However, investors should always refer to the issuing company's preliminary prospectus, also known as a "red herring," which includes information on the company's management team, target market, competitive landscape, financials, expected price range, potential risks, and the number of shares to be issued.

Pre-IPO investments

To participate in an IPO, investors must meet certain eligibility requirements, such as having a minimum of $100,000 or $500,000 in household assets or being a Premium or Private Client Group customer. Once eligible, investors can sign up for Fidelity Alerts to stay updated on new offerings and download the offering prospectus, which contains important information about the company and the IPO.

It is important to do your research and understand the company's management team, target market, competitive landscape, financials, expected price range, and potential risks before investing in an IPO. The lead underwriter and issuer will determine the offering price based on factors such as indications of interest from potential investors, the company's financials, and market demand.

Investors should also be aware that there is no guarantee that they will receive the number of shares they request due to high demand for some IPOs. Additionally, quickly selling IPO shares, known as "flipping," is discouraged by most brokerage firms, and may result in restricted eligibility for future offerings.

Overall, pre-IPO investments offer an opportunity to invest in a company early in its life cycle, but it is important to carefully consider the risks and do your due diligence before investing.

IPO calendar

An IPO calendar is a useful tool for investors looking to capitalise on new companies entering the stock market. IPOs (Initial Public Offerings) are the process of a company selling its shares to the public for the first time. Typically, younger companies use IPOs to raise capital for future business expansion.

The IPO calendar is a list of upcoming IPOs, with details of the company going public, and the date of the IPO. This is useful for investors to plan their investments and understand the market. IPO calendars can be found on financial websites, such as Nasdaq, MarketWatch, and Stock Analysis. These calendars provide investors with a list of companies that will be offering shares to the public in the near future.

For example, here is a list of companies with IPOs in the near future, according to MarketWatch:

• Range Capital Acquisition Corp.
• Youxin Technology Ltd
• Health In Tech, Inc.

And here is a list of companies with future IPOs, also from MarketWatch:

• 3 E Network Technology Group
• Aixin Life International
• APRINOIA Therapeutics
• Aspen Insurance Holdings
• Autozi Internet Technology
• Baiya International Group
• Biotech Group Acquisition
• Black Hawk Acquisition
• Blue-Touch Holdings Group
• Cine Top Culture Holdings
• CO2 Energy Transition Corp.

It is important to note that IPO dates are rarely set more than 7-10 days in advance, so IPO calendars are subject to change.

Fidelity, a popular investment platform, also offers its own IPO calendar and alerts for its customers. To be eligible to participate in an IPO through Fidelity, customers must meet certain requirements, such as having a minimum of $100,000 or $500,000 in household assets or being a Premium or Private Client Group customer.

Frequently asked questions