How to Invest in IPOs at Schwab

Before investing in an IPO, investors need to find upcoming offerings that they are eligible to participate in. To find new IPOs, clients can visit Schwab.com/ipo to view a Calendar of Offerings or contact us at 800-435-4000.

After finding an IPO, make sure to review the preliminary prospectus, which includes details about the company's operations, financial data, and risk factors. Investors must acknowledge that they have reviewed the preliminary prospectus before participating in an IPO. It's also important to check eligibility requirements as well as any potential anti-flipping requirement associated with the offering.

When participating in an IPO, investors should thoroughly analyze the company's fundamentals and ensure their investment aligns with their broader financial plan and goals.

Note: Before participating in an IPO at Schwab, clients must indicate they have read and understood our Agreement and Disclosure document.

1. Verify the IPO's Offering Window Is Open

On Schwab.com, under the Trade tab, select the IPO page to view the Calendar of Offerings—a list of upcoming IPOs. Once the IPO offering window opens, investors will have the ability to submit a Conditional Offer to Purchase (COTP), also known as an Indication of Interest, from this page.

2. Submit a Conditional Offer to Purchase

During an IPO's open COTP window, select Start COTP to review offering details and the preliminary prospectus. Then select the green button to proceed to the Eligibility Questionnaire, which is required to confirm investors meet eligibility criteria and are not restricted (per FINRA rules) from participating. After completing the questionnaire, you'll be able to indicate how many shares you're interested in purchasing based on the price range provided. Select Confirm to submit the COTP.

3. Affirm the Conditional Offer to Purchase

After the COTP has been submitted, it's important to regularly monitor the IPO page, which will indicate the Status of Your Conditional Offers to Purchase (COTPs), the expected pricing date, and current pricing status, plus any changes in the prospectus.

When the IPO has been priced, it's time to affirm the COTP. Investors must affirm their COTP once the effective price is established in order to be eligible to purchase shares. To do so, select Affirm Now to review and finalize the share quantity. You can also contact a Schwab representative at 800-435-4000.

IPOs may offer significant upside potential, but they can also involve more risk and volatility than well-established stocks. Before participating in an IPO, investors should consider the risks involved:

• Limited financial history. Many companies going through IPOs have often only recently begun reporting their financial results, meaning investors may have less information to evaluate their businesses.
• Potential for elevated volatility. Newly issued stocks often experience sharp price swings as investors react to earnings reports, analyst coverage, and changes in investor sentiment.
• Uncertain valuations. IPOs can be difficult to value because investors and analysts often need to rely on assumptions about future growth rather than basing their analysis on past operating performance.
• Lock-up expirations. Early private investors and employees are legally restricted from selling their stock immediately after an IPO. However, once lock-up periods end, these investors and insiders may begin selling shares to realize gains, which can put downward pressure on the stock.
• Sensitivity to market sentiment. IPO performance is often more heavily influenced by investors' risk appetite as well as economic and market conditions than more established public stocks.

What is an IPO?

An initial public offering is when a private company issues new shares to the public for the first time. The IPO-issuing company then trades publicly on a stock exchange such as the New York Stock Exchange (NYSE) or Nasdaq. Private companies go public for a variety of reasons. Some want to raise capital to grow their businesses or pay down debts, while others want to provide early shareholders and employees a chance to realize gains on their investments.

If I complete the IPO participation process, am I guaranteed an allocation?

No. Allocations are limited and not guaranteed. While allocation rules vary by offering, investors may receive fewer shares than requested or none at all.

Where do I find the preliminary prospectus?

Go to the Calendar of Offerings and select the IPO name. This will open the Offering Details page. From there, select the Preliminary Prospectus link at the bottom of the page. A paper copy of the preliminary prospectus can also be requested by contacting Schwab at 800-435-4000.

Do I need to complete an Eligibility Questionnaire for each offering?

Yes. Schwab is required to determine whether clients have relationships with the issuing company or the securities industry for each offering. As a result, an Eligibility Questionnaire must be completed for each IPO.

Can I change my Conditional Offer to Purchase after it is established?

Yes. Go to the Calendar of Offerings and select the Change link to alter a COTP after it is established. However, it's important to note that COTPs cannot be changed or canceled after they have been affirmed.

When do I need to complete my Conditional Offer to Purchase?

A COTP must be completed by the COTP cut-off time for each offering. Generally, this is 4 p.m. ET on the business day immediately preceding the expected pricing date. Schwab reserves the right to change the cut-off time for each offering at any time without prior notice.

When do I need to affirm my Conditional Offer to Purchase?

COTPs must be affirmed prior to 7 a.m. ET the morning following the night an offering is priced. This period of time is very short, so investors should consistently monitor the Calendar of Offerings for the effective price announcement.

I forgot to affirm my COTP and the affirmation window has closed. Will I be eligible for allocation? No. All COTPs must be affirmed within the affirmation window in order to be considered for allocation.