IPO trading

Yes, you can make a profit trading initial public offerings if you correctly predict share price movements. However, if your prediction is incorrect, you’d incur a loss.

You’ll use spread bets or CFDs to speculate on our grey markets before an IPO, or on share price movements after the stock has listed. When utilising these financial derivatives to trade with us, you’d use leverage. While this means that you only need a small deposit – called margin – to open your position, your potential profits and possible losses will also be magnified to the full value of the position. Making it vital to manage your risk properly.

Learn more about how leverage impacts your trading

You could also profit from an IPO if you buy shares outright through our share dealing platform and they rise in value, but you’d take a loss if you sell your shares for less than what you bought them for.

While there are risks involved in any trading or investment activity, IPOs have additional risks. These include:

• Not being adequately informed with important company information that might affect share prices, eg ongoing legal cases and intellectual property that isn’t patent protected
• A short to no trading history to inform trading decisions
• Market expectations not being met due to inflated estimations
• Companies not meeting their target market cap

It’s important that you have all the relevant information before you commit to any trade. When trading IPOs, some useful documents include company prospectuses and admission documents. Staying informed helps you avoid risks that might affect your position.

Whether or not it is a good idea to invest in an IPO depends on your risk appetite. Some IPOs perform very well, while others can disappoint. Financial markets can be very volatile following a high-profile IPO, which is why you need a proper risk management strategy in place if you want to buy or sell shares.

Yes. You can subscribe to invest in stock before the IPO, and you’ll receive your allocation on the IPO date. Or, you can speculate before the IPO by trading our exclusive grey markets – which let you take a position on a company’s estimated market capitalisation at the end of its first trading day.

Trading and investing are different in many ways. When trading IPOs with us you’ll use spread bets, which come with various tax benefits,⁴ and CFDs. Financial derivatives such as spread bets and CFDs allow you to trade without owning the underlying asset.

Remember, you’ll trade using leverage, meaning that you’ll only commit a fraction of the full value of the trade to open your position. While your initial outlay is reduced significantly, both profits and losses will be magnified to the full value of the trade, making it important to manage your risk properly.

Leverage isn’t available on investments. When you invest in IPOs with us, you’ll own the underlying company shares, gaining voting rights as well as eligibility to receive dividends (if paid by the company). You can also make a profit if you sell your shares at a higher price but if the share price is lower when you sell them, you’ll incur a loss. However, you’d never lose more than your initial outlay as losses on investments are capped at the full value of your trade (excluding any additional fees).