How to Make Money from the Oversubscribed Initial Public Offering

Simply put, IPOs, or Initial Public Offerings, are among the best investments available. The key is to discover the appropriate one, and with a little knowledge and basic research, you may become one of those successful investors you’ve heard about. In this essay, I’ll explain what a “Oversubscribed IPO” is and why it’s something you should investigate more.

When it comes to making IPO profit, demand is the single most essential factor. You don’t care what kind of business you’re looking at—without demand, you’re looking at a tragedy waiting to happen.

Demand for IPOs differs from demand for other investments in that demand for an existing share merely refers to volume. An IPO’s demand indicates whether or not investors are interested in profiting from a newly created public firm, and the stronger the demand, the higher the price.

An IPO oversubscription is the trading scenario when IPO has yet to trade but has a waiting list of investors who far outnumbers the number of shares available. Consider a basic supply and demand scenario. An oversubscribed initial public offering is no different from silver, gold, or oil. The price skyrockets after demand exceeds supply due to the momentum.

So now that you know what an Oversubscribed IPO is, let us find out what it means to you, the IPO Investor, and how you can profit from it.

Face it, getting in on a hot IPO as a “normal investor” without a lot of connections or funds is nearly difficult, but there is a backdoor in, and I’ve personally been able to pick up returns of over 3000 percent utilizing this strategy, which I’ll describe right now.

The secret to getting into a hot IPO, or even an oversubscribed IPO, without being a part of the “private placement” is to place your order for the IPO on trading day, but before the market opens. That may sound unusual, but this little-known procedure can benefit you in two ways:

1. It allows you to participate in the IPO as a “aftermarket buyer” at the IPO’s initial price and;

2. It has the potential to save you a lot of money.

The trick is to call your broker (including online brokers) after 8:30 a.m. and put a “limit order” for the IPO. So, what exactly is a “limit order”?

Read more: How do you calculate a stock’s long-term profitability in India? 

A limit order is one in which the investor specifies the maximum price he or she is willing to pay as well as the number of shares they want to buy. Now, this could be as little as one share or as much as 100,000 or more.

So, as long as your order qualifications (price and number of shares) are met, placing this “limit order” on an Oversubscribed IPO on a trading day after 8:30 a.m. EST ensures you get in on that IPO the millisecond it debuts as a public company.

So there’s no need to be concerned. Your order will be filled when the IPO begins to trade, which can range from 10:00 a.m. to 1:30 p.m. for some of the more popular IPOs. That said, if you don’t issue a limit order and wait until the IPO begins to trade, valuable time may pass, and the IPO’s price may quickly rise in that time, and by the time you get around to buying it, it may be considerably over the initial price.

Finally, when dealing with high-profile IPOs, hot IPOs, or oversubscribed IPOs, an IPO limit order saves you money.

Disclaimer: This article is for information purposes only. The views expressed in this article are personal and do not necessarily constitute the views of and/or the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.