IPOs for the rest of us

Today I received a great question, one which prompts me to elaborate on trying to get the lowest price possible the day an IPO hit’s the street for public trading.

Here is a great article on how IPOs work based on the ever famous Google IPO, although GOOG was supposed to be available to the "average investor" lots of good info here:
http://www.signonsandiego.com/uniontrib/20040812/news_1b12google.html

The primary factor here is that unless you have a large account (read most likely millions, I have heard of some getting in with reasonable accounts in the six-figures) with one of the underwriters or brokerage houses directly involved with the IPO. So unless someone has any way the rest of us can get in on an IPO at the IPO price this is how I have done it in the past.

I use TDAmeritrade for my active trading and Sharebuilder for my more dedicated long term buys, neither are participants in IPOs.

To get a low price you need to get in early, however the ticker is not available to trade on normal trading accounts until the day of the IPO.

TDAmeritrade will actually accept orders a few minutes early on “opening day.” If you try the looking up the ticker on Ameritrade it will not show until 10-20 minutes prior to the open. So I set my limit order to what I am willing to purchase and keep submitting until the system identifies the ticker and accepts the order.

Now, I have been successful this way, most recently on the VMW IPO which I got in on opening day at 51, much higher than the 28 others got but still below the 120+ it hit. Although in an attempt to not be greedy or emotional I sold before that 120+ moment. However, the possibility still exists that using a plain-jane limit order might prevent you from filling your order if you are setting stops or instructions of All or None, etc…

I figured this out from some research which pointed me to the 15-20 minutes early on Ameritrade to realizing that the trading house wouldn’t quote the new ticker until then preventing me from setting a limit order the night before like I would usually do.