For those investors who have access to an initial public offering, the minimum investment requirements varies. Depending on the source through which an investor buys shares of a new issue, the IPO standards could be applied to the number of shares that must be purchased or the monetary value of an allocation for an investor to qualify for participating in a deal. Minimum requirements could apply to investing in individual IPOs or mutual funds that buy new issues.
Obtaining shares in an IPO is contingent on accounts and relationships established in the investment community. According to investment research provider Morningstar, IPO underwriters, which are the financial institutions that set deal criteria, traditionally sell IPO shares to other institutions and rich investors. Morningstar suggests that the average investor cannot participate in most IPO deals. If an investor has an account with brokerage firms or asset managers who have relationships with IPO underwriters, however, he might gain access to a new issue.
Minimum & Maximum
Gibraltar Capital, an asset management firm, established a program through which investors can buy shares of new issues in the markets. The average minimum investment requirement for clients is 10,000 shares of an IPO, while investors may be limited to buying no more than 30,000 shares of a new issue. The precise criteria may vary for each IPO. According to the Gibraltar website, investors must also agree to eventually sell shares according to terms outlined by the asset management firm.
A corporation that plans to issue shares in the equity markets through an IPO may offer employees special access to the new stock. According to an article on the Huliq website, when automaker General Motors planned an IPO after the company emerged from bankruptcy, it allowed investors access to buying shares of the new issue. Current and former employees as well as auto dealerships meeting a minimum investment requirement of $1,000 were able to buy shares of the IPO over a given time period.
There may be minimum investment requirements attached to mutual funds that buy shares in multiple IPOs on behalf of investors. A benefit for investors is gaining access to the prowess and buying power that a professional investment fund and manager has. Renaissance Capital oversees one such IPO fund that allocates capital to new issues around the world. The investment minimum for standard accounts is $5,000 and a lesser $2,500 minimum attached to individual retirement accounts.
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