Buy IPOs Through Bought Deal
A bought deal is one way that an underwriter offers an initial public offering of stocks (IPO). The various ways of selling IPOs only differ in how the financial sponsor of the company, or underwriter, sells the stocks. There is no real difference to the stock buyer who purchases IPOs through a bought deal, although this method can be a good predictor of the future success of the stocks.
Instructions
Buy IPOs Through a Bought Deal Campaign
1. Ask your investment bank about the kinds of IPOs that are available to you. If you have a high amount of money invested through the bank, then you may be offered bought deal IPOs. These campaigns sell very quickly and underwriters offer them to their best customers first.
2. Find out the amount of bought deal stocks that the bank is offering. In this type of IPO offering, the bank or other underwriter buys a certain amount of stocks from the company upfront. This way, the bank is assuming that they will be able to sell all of the stocks it purchases, so the number of stocks sold in the deal can be a good indicator of the underwriter's confidence in the company's performance.
3. Look into shareholder opportunities. A large offering of IPO stocks through a bought deal can be a chance for an investor to gain influence in the company right before it goes public. You may be able to purchase enough stocks to have an influential amount of shareholder votes.
4. Buy the stocks by talking to your financial representative at the investment bank. You'll have make a quick decision because bought deal stocks can sell very quickly. If you're one of the bigger investors at the bank, you'll often have advance knowledge of the IPO while the bank is negotiating it.
5. Pay close attention to your stocks' performance during the 40-day quiet period after you buy. You aren't allowed to talk about the money made off of these stocks during this time. After the end of the quiet period, you should have a good idea of whether you want to hold on to these stocks or sell them.
