How you actually make money on an IPO

Selling at the first traded price

The standard approach is to sell the shares you were allocated on the day the company lists, at the very first price the market sets. Buy low before listing, sell when it opens higher. It is the simplest way to take a profit from an IPO and the one most people start with.

The mechanics are straightforward. Win the lottery, buy at the offer price, wait for the listing day, and sell when trading opens. There is no need to hold for months — most of the time the whole thing is over before lunch on the first day.

Why there is a profit to be had at all

You buy at the offer price, fixed before listing, and sell at the first traded price, set by the market afterwards. The gap between them is your result. Newly listed companies tend to attract attention, and the first traded price has historically come in above the offer price more often than not. That tendency is the whole reason IPOs are considered worth chasing.

How the two prices relate

The offer price is agreed in advance between the company and its underwriters — the price at which you are allowed to buy. The first traded price is decided by supply and demand once trading opens. When many more people want in than out, it can open well above the offer price, and that difference is where the profit comes from.

Three steps

Apply and win. Applying through a broker enters you into the lottery, and winning gives you the right to buy at the offer price.

Buy at the offer price. Complete the purchase step and the shares are yours.

Sell at the opening on the listing day. Placing an order to sell at the open means you sell at whatever the first traded price turns out to be.

No special technique is involved. The process is identical for a beginner and for someone who has done it fifty times.

The risk nobody puts in the headline

Shares do open below their offer price. It happens regularly, and when it does, selling at the open crystallises a loss. Nothing about an IPO is guaranteed, and your capital is genuinely at risk.

Only commit money you can afford to have tied up or reduced. Any site showing you only the winners is not showing you the business.

What to do now

Look at the listings currently tracked and how past ones actually performed, including the ones that fell.