Navigating the IPO Landscape: Investing with Fidelity, TD Ameritrade, and IPO-focused ETFs

Introduction

Investing in Initial Public Offerings (IPOs) can be an exciting and potentially rewarding opportunity for investors. In this blog post, we will explain what an IPO is, how to invest in IPOs, and how to participate in them through Fidelity and TD Ameritrade. We will also introduce two Exchange-Traded Funds (ETFs) that focus on investing in IPO companies: the First Trust US Equity Opportunities ETF (ARCA:FPX) and the Renaissance IPO ETF (IPO).

What is an IPO?

An Initial Public Offering (IPO) is the process through which a private company becomes a publicly-traded entity by offering its shares for the first time to the general public. IPOs enable companies to raise capital, increase visibility, and attract a wider range of investors. For investors, IPOs provide an opportunity to invest in potentially high-growth companies early in their development.

How to Invest in IPOs

To invest in an IPO, you need a brokerage account with a firm that provides access to IPOs. Both Fidelity and TD Ameritrade are popular choices for investors looking to participate in IPOs.

Participating in IPOs through Fidelity

Fidelity offers its customers access to IPOs underwritten by Fidelity Capital Markets and other participating broker-dealers. To be eligible for IPO participation through Fidelity, you must meet the following requirements:

1. Have a minimum of $100,000 in retail assets held at Fidelity.
2. Maintain a valid U.S. residential address.

To participate in an IPO, log in to your Fidelity account, navigate to the “News & Research” tab, and click on “IPOs” to view the available offerings. Follow the on-screen instructions to place an IPO order.

Participating in IPOs through TD Ameritrade

TD Ameritrade provides its customers with access to IPOs managed by TD Ameritrade or other participating firms. To be eligible for IPO participation through TD Ameritrade, you must meet the following requirements:

1. Have a minimum of $250,000 in total account value or have completed at least 30 trades within the last three months.
2. Maintain a valid U.S. residential address.

To participate in an IPO, log in to your TD Ameritrade account, navigate to the “Research & Ideas” tab, and click on “IPOs” to view the available offerings. Follow the on-screen instructions to place an IPO order.

IPO-focused ETFs

First Trust US Equity Opportunities ETF (ARCA:FPX)

Founded in 2006, the First Trust US Equity Opportunities ETF seeks to replicate the performance of the IPOX-100 U.S. Index. This index comprises the 100 largest and most liquid U.S.-listed companies after their IPO. The fund is designed to provide investors with exposure to the performance of recent IPOs and focuses on companies with market capitalizations of at least $50 million.

Fees: The fund has an expense ratio of 0.58%.

Renaissance IPO ETF (IPO)

Launched in 2013, the Renaissance IPO ETF aims to track the performance of the Renaissance IPO Index. The index includes newly listed U.S. companies that meet specific liquidity and operational thresholds. The ETF provides investors with diversified exposure to recent U.S. IPOs and typically holds these companies for two years after their IPO.

Fees: The fund has an expense ratio of 0.60%.

Conclusion

Investing in IPOs can be a thrilling opportunity for investors seeking exposure to new, high-growth companies. Both Fidelity and TD Ameritrade provide platforms for investors to participate in IPOs, with specific eligibility requirements. For those looking for diversified exposure to IPOs, consider the First Trust US Equity Opportunities ETF (ARCA:FPX) and the Renaissance IPO ETF (IPO), which offer access to a broad range of recent U.S. IPOs. Keep in mind that investing in IPOs carries risks, and it’s important to conduct thorough research and consider your risk tolerance before participating in any investment opportunity.