1、What is IPO subscription? How to participate?
Currently, most companies go public by initial public offering (IPO), which is the first time a company offers shares to the public to raise capital by setting a price range for the offering.
"IPO subscription" means that an investor participates in an IPO and has the opportunity to buy shares at the finalized offering price on a listing day.
Unlike IPO subscriptions of China A-shares and HK stocks, conventional U.S. stock IPOs do not offer public subscriptions. This is because institutional investors dominate the U.S. stock market, and the previous new share offerings were generally placed only for institutional investors, issuers' friends and family, and a small number of individual investors with subscription capital of over one million U.S. Dollars. As for the retail investors, they face a relatively high entry barrier of subscription.
On the contrary, U.S. stock IPO subscriptions at Tiger Brokers is an innovative service for retail investors. Tiger Brokers will participate in the underwriting or distribution of new U.S. stock IPOs, and allocate its quotas to clients to lower the U.S. stock IPO subscription threshold.
Reminder: If you regard yourself as a "Restricted Person" (as described in FINRA RULE 5130/5131), you will be denied from subscribing new shares of U.S. stocks. For more detailed regulations and rules, please refer to FINRA RULE 5130/5131.
2、What are the capital requirements for IPO Subscription? How much money is needed for IPO Subscription?
The capital requirements for participating in the U.S. IPOs vary by account type, which means that clients need to have sufficient funds ("frozen funds" or "fund to be checked," depending on different genres of accounts) to satisfy the capital requirement.
(1) For the Prime Account - Margin Account, when clients submit subscription applications of U.S. stock IPOs, Tiger Brokers will check the available funds in their accounts and freeze the subscription margin required for U.S. stock IPO. The amount of frozen funds is calculated as follows:
The amount of frozen funds = subscription shares * freeze percentage * Higher(lower) bound of the issue price range (the issue price range will be determined when the U.S. stock IPOs are open for subscription，the freeze percentage varies depending on the project, typically ranging from 80% to 100%).
Please note that if the frozen funds in your account are insufficient, the subscription application will be rejected. Please ensure that you have sufficient funds on your account before subscribing; if you use non-USD funds to subscribe after the successful allotment, you may incur foreign currency liabilities and loan interest. Therefore, please pay close attention to your account status in time.
(2) For the Prime Account - Cash Account, when clients submit subscription applications of U.S. stock IPOs, Tiger Brokers will check available USD cash and freeze sufficient cash amount required for U.S. stock IPO. The amount of frozen funds is calculated as follows:
The amount of frozen funds = subscription shares * freeze percentage * higher(lower) bound of the issue price range.
Please note that if the frozen funds in your account are insufficient, the subscription application will be rejected. Please ensure that you have sufficient funds in your account before subscribing.
(3) For the Global Account - Margin Account, Tiger Brokers will check clients' available funds twice to ensure that clients have sufficient funds for the U.S. stock IPO, once after the subscription period and once before the announcement of the allotment results. The total available amount of funds to be checked is calculated as follows:
Total available amount of funds to be checked = subscription shares * 120% * upper bound of the issue price range.
Please note that if the account fails the funds check, the subscription application/allotment order will be rejected, or the amount of subscription shares may be adjusted. Please ensure that your account has sufficient funds during the subscription process; if you use non-USD funds to subscribe after the successful allotment, you may incur foreign currency liabilities and loan interest. Therefore, please pay close attention to the account status in time.
(4) For the Global Account - Cash Account, Tiger Brokers will check client's available USD cash twice to ensure that clients have sufficient cash for the U.S. stock IPO, once after the subscription period and once before the announcement of the allotment results. The total available amount of funds to be checked is calculated as follows:
Total available amount of funds to be checked = subscription shares * 120% * upper bound of the issue price range.
Please note that if the account fails the funds check, the subscription application/allotment order will be rejected, or the amount of subscription shares may be adjusted. Please ensure that your account has sufficient funds during the subscription process.
[Example]: Xiaohu subscribes for 100 shares of Pinduoduo, with an issue price range of US$16-19 per share, and the subscription can be successful if the following amounts are met:
Prime Account - Margin Account(If higher bond and freeze percentage is 100%): The amount of frozen funds = 100*100%*19=1,900USD (Account margin value = 1,900USD)
Prime Account - Cash Account(If higher bond and freeze percentage is 100%): The amount of frozen funds = 100*100%*19=1,900USD
Global Account - Margin Account: Total available amount of funds to be checked = 100*120%*19=2,280USD (Account margin value = 1,280USD)
Global Account - Cash Account: Total available amount of USD cash to be checked = 100*120%*19=2,280USD
※Remarks:
Frozen funds: When a client uses a Prime Account to submit a subscription application, Tiger Brokers will freeze a sufficient amount of funds to ensure that the client has sufficient funds for the shares allocation once winning the lot. Frozen funds are not deductions (or prepayments). Once the subscription funds are frozen, the client cannot use this part of funds for other transactions or operations; namely that the client cannot use the frozen funds to buy stocks or participate in other IPO subscriptions. If the client does not win the lot, this part of the funds will be automatically unfrozen. Please note that only when the clients participate in U.S. stock IPO subscriptions with the margin account and cash account of the Omnibus account will be involved in freezing certain amounts of funds.
What if the final price of a U.S. stock exceeds the issue price range?
When the final price of a U.S. stock does not exceed ±20% of the issue price range, the subscriber's subscription application is still valid. When the final price of a U.S. stock exceeds ±20% of the issue price range, subscribers need to reconfirm their subscription application. If the subscriber fails to reconfirm their subscription application within a certain period, the subscription application may become invalid.
3、What is a successful allotment? How does it work?
A successful allotment is when an investor who subscribes for new issue shares successfully buys all or parts of the shares subscribed for at the offering price on the listing day.
There are no statutory uniform allocation rules for U.S. new issue shares offerings. It is up to the underwriters or distributors to decide how to allocate the new issue shares to the investors subscribing.
Tiger Brokers' new issue shares allocation generally operates on the following principles:
(1) as many investors as practicable are to be allotted with new issue shares;
(2) allocation to investors who subscribe for more is generally more (and at least not less) than allocation to investors who subscribe for less.
In some new issue shares offerings, by reason of participating in certain promoting events and winning rewards, being directed by the issuer or etc., certain clients may be allotted with a certain number of new issue shares on a priority basis before other clients are allotted pursuant to the above principles.
If Tiger Brokers is going to allocate any new issue shares to any account in which Tiger Brokers owns 10% or more of its beneficial interest, such allocations will be conducted after Tiger Brokers' clients are allotted pursuant to the above principles.
Note that the allocation mechanism for each U.S. new issue shares offering is subject to change due to various uncertainties in the allocation process. Investors subscribing for new issue shares may be allotted with the full subscription amount, a portion of the subscription amount, or nothing. Tiger Brokers reserves the right of final interpretation of the allocation mechanism of the U.S. new issue shares offering.
4、When will the listing price be determined? When will the winning result be announced? What is the allocation process?
(1) The issue price of a new U.S. stock is determined the day before the listing date;
(2) The underwriting group usually confirms the final quota and starts the allocation on the day of listing, so the subscribers will not know the subscription result until the listing date;
(3) Tiger Brokers' U.S. stock allocation process: Tiger Brokers' U.S. shares are first allocated by the underwriters to the Tiger Clearing Brokers. When Tiger Clearing Brokers obtain their quota of initial shares, they will announce the winning results as soon as possible and distribute the shares to subscribers in accordance with the rules.
Since Tiger Brokers has been providing U.S. stock IPO subscription channel services, Tiger Clearing Brokers usually obtain initial shares on the listing date between 9:00 and 10:00 a.m. EST (i.e. 9:00-10:00 p.m. Beijing time during summertime). Once receiving the shares, Tiger Brokers will immediately begin processing the allocation. As the time of obtaining the quota depends on the underwriters, Tiger Brokers cannot guarantee that the allocation of initial shares will be completed before the official listing time, and it is possible that the allocation may be completed several hours later than the official listing time.
5、What is the difference between the planned amount of U.S. stock IPO and the final amount of U.S. stock IPO? What is the difference between the issue price range and the issuance pricing?
(1) The number of U.S. stock IPO is usually a guidance quota given by the underwriter in consultation with the listing company (i.e. the issuer) based on a combination of indicators, including market demand and company size. Before the initial shares are officially listed for trading, the issuer can adjust the issuance scale according to market conditions, and the final issuance amount of shares may fluctuate between 80% and 120% of the originally planned amount.
(2) The U.S. stock issue price range is usually a guidance range given by the underwriters based on company valuation, market factors, etc. Generally, the company will determine the final issuance pricing one day before the official listing date, and it is usually within the issue price range. However, if market fluctuations occur, the final price may fluctuate between 80% of the lower bound and 120% of the upper bound of the issue price range.
Example: Tiger Brokers (TIGR) was listed on Nasdaq on March 20, 2019, and the final price was 8 USD/share, which was higher than the previous issue price range of 5-7 USD/share.
Frequently Asked Questions about Tiger Trade's U.S. IPOs Purchase
Q: How to subscribe for U.S. Stock IPOs?
A: Tiger Brokers' U.S. stock IPO subscriptions accept cash and available purchasing power (Margin Account only). Currently, financing subscriptions are not available.
Q: How to participate in the U.S. Stock IPOs through Tiger Brokers?
A: Investors can check the recently available U.S. stock IPOs to participate through the Tiger Trade APP-[New Stock Subscription].
Q: When is the subscription opening and closing time?
A: The subscription time of each IPO is different according to its roadshow schedule, and clients need to pay attention to the IPO subscription information in time.
The subscription time for U.S. stocks is relatively short. Based on previous data of subscription opening hours, subscriptions are usually opened 3-5 days before the listing of new shares, and subscriptions are closed 1-2 days before the listing of new shares. The subscription time is as short as 1 day or as long as 3-4 days. Please be aware that the underwriters may close or extend the subscription channel in advance in case of particular circumstances.
Q: What is the number of initial shares to be subscribed?
A: Under normal circumstances, the minimum subscription quantity for a U.S. Stock IPO is 100 shares, and the minimum subscription quantity may vary for different U.S. stock IPOs. Clients can subscribe on the top of the minimum subscription quantity and do not,need to subscribe by integer multiples, namely that clients can subscribe for 102 shares, 120 shares, 150 shares, etc.
Q: What currencies does the U.S. Stock IPO support? Do I have to subscribe in U.S. Dollars?
A：(1) For Margin Accounts, if the account assets are sufficient, even if there are no U.S. dollars, the clients can still subscribe for U.S. stock IPO directly.
Please be aware that if you participate in a U.S. stock IPO with no U.S. Dollars in your margin account and you win the lot, your behavior of purchasing the allocated stocks is a financing subscription (i.e. borrowing U.S. dollars from Tiger Brokers). If you do not sell your allocated shares on the day you win the lot, you may incur a certain amount of interest charges. For more detailed financing interest, please refer to https://www.itigerup.com/help/detail/30304884. If you do not win the lot or sell the shares on the day of the winning, you will not incur interest charges.
(2) For Cash Accounts, clients can subscribe only in U.S. dollars. Clients can convert other currencies into U.S. dollars in the account before the subscription, and the U.S. dollar amount should meet the minimum amount required for a subscription.
Q: When participating in a U.S. Stock IPO with only Hong Kong dollars in the account, will there be additional borrowing interest due to different currencies in addition to the IPO financing interest?
A: No additional loan interest will be incurred during the subscription period, but when the successfully subscribed shares are issued to the account, an equivalent amount of U.S. dollars will be owed and no loan interest will be incurred if paid off on the same day.
Q: When I subscribe two U.S. Stock IPOs at the same time but have insufficient funds in my account,what are the rules for confirming the subscription?
A: Tiger Brokers will confirm the subscription in the order of the subscription application submitting time.
Q: What is the frozen funds?
A: When a client uses a Prime Account to submit a subscription application, Tiger Brokers will freeze a sufficient amount of funds to ensure that the client has sufficient funds for the shares allocation once winning the lot. Frozen funds are not deductions (or prepayments). Once the subscription funds are frozen, the client cannot use this part of funds for other transactions or operations; namely that the client cannot use the frozen funds to buy stocks or participate in other IPO subscriptions. If the client does not win the lot, this part of the funds will be automatically unfrozen. Please note that only when the clients participate in U.S. stock IPO subscriptions with the margin account and cash account of the Omnibus account will be involved in freezing certain amounts of funds.
Q: When will the U.S. stock IPO subscription funds start to be frozen?
A: Tiger Brokers' Prime Account: The required subscription funds will be frozen once the subscription application is submitted.
Tiger Brokers' Global Account: The clients will not incur fund freezing, but have to ensure that their account has sufficient funds during the subscription process, otherwise the subscription application/allotment order will be rejected or the amount of subscription shares may be adjusted.
(Note: Frozen funds are not deductions (or prepayments). Once the subscription funds are frozen, the client cannot use this part of the funds for other transactions or operations. If the client does not win the lot, this part of the funds will be automatically unfrozen.
Q: How do I know the subscription status?
A: Clients who participate in the IPO subscription can check the subscription status through the Tiger Trade APP-[New Stock Subscription]. After the allotment result is announced, the status will be updated to: successful or unsuccessful. (You can also see the allocated shares in your holdings if you win the lot). Generally, Tiger Brokers will also notify clients of the winning result via SMS after the result announcement.
Q: When will the funds of unsuccessful subscribers of U.S. stocks be unfrozen?
A: When the status of the "My Subscription" page is updated to "Unsuccessful", the client's frozen funds will be unfrozen.
Q: There are multiple statuses displated after submitting the subscription application. What do they stand for?
A: After submitting the subscription application, the APP will display the following statuses:
(1) Submitting: Indicating that the client has submitted the subscription application and is awaiting Tiger Brokers' review;
(2) Pending: Indicating that the client has submitted the subscription application but can still modify or cancel the application.
(3) Confirmed: Indicating that the subscription application has been confirmed, but the allotment result has not been determined yet. At this stage, the subscription application cannot be modified or canceled.
(4) Partially confirmed: Indicating that the number of shares subscribed has been reduced to a sufficient amount as the margin is insufficient for the submitted subscription quantity.
(5) Rejected: Indicating that the subscription application was rejected as the margin cannot meet the minimum subscription quantity requirements.
(6) Successful: Indicating that the client has won the lot and been allocated all or part of the subscribed shares. The stock arrival time may be slightly delayed.
(7) Unsuccessful: Indicating that the client has not won the lot and therefore not received the subscription shares.
Q: Why did I fail to win the lot when I subscribed 1,000 shares, while others won the lot when they only subscribed 200 shares?
A: Tiger Brokers' new issue shares allocation generally operates on the following principles:
(1) as many investors as practicable are to be allotted with new issue shares;
(2) allocation to investors who subscribe for more is generally more (and at least not less) than allocation to investors who subscribe for less.
In some new issue shares offerings, by reason of participating in certain promoting events and winning rewards, being directed by the issuer or etc., certain clients may be allotted with a certain number of new issue shares on a priority basis before other clients are allotted pursuant to the above principles.
Q: What is the subscription fee for U.S. stocks?
A: For more details, please refer to: https://www.itiger.com/help/detail/99206464.
Q: Can Tiger Vault's purchasing power be used when applying to the IPO subscription?
A: YES.
NOTES:
1) When using Tiger Vault to apply for an IPO, the shares of Tiger Vault used will enter the automatic redemption process after the successful subscription;
2) If the redemption amount is not received at the time of the IPO allocation day, financing interest may be incurred;
3) The IPO subscription does not guarantee the allocation amount. If you use Tiger Vault for IPO subscription, and the amount that has been automatically redeemed by Tiger Vault is less than the allocated amount on allocation day, the insufficient part will continue to be redeemed from Tiger Vault and ； the corresponding financing interest will be incurred before the redemption amount is credited.
Please make reasonable arrangements for subscription or manually redeem Tiger Vault in advance.
For specific rules, see Tiger Vault function introduction
*In case of any discrepancy between different language version, Chinese version shall prevail.