Abstract:
Hot IPO involves trading of shares which are greatly in demand. In case of Hot IPO stocks, demand exceeds supply and therefore the companies opening IPO deals gather substantial gains in the first few days of trading.
Hot IPO refers to an Initial Public Offering, which has excessive demand in the market. In case of this type of Initial Public Offering, investors are so much interested in buying these securities that the demand exceeds the supply by far. Due to this great demand, prices of the shares start to increase tremendously, as soon as the IPO deal is opened in the market.
In general, the shares offered through Hot IPOs are said to be oversubscribed shares. This means that the shares are in great demand and supply is falling short of the demand. It should be mentioned here that, as the shares of Hot IPOs generally involve high demand, the underwriter companies offer these stocks to their most valued customers.
If we look into the history of Hot IPOs, we will find, that the world experienced hottest IPOs in the late years of 1990s. In this period, demand for Internet Stocks reached record high level and almost all the Internet Stocks was found to be oversubscribed. Due to this excessive demand, these Hot IPOs experienced substantial gains in the first few days of trading.
The extent of high IPO demand of this period can be understood from an example. In this phase, price of shares of an IPO went upto $68 from $16.
Among these late years of 1990s, the most memorable year was 1999. This year can be termed as the year of the exploding IPOs. In fact the trend of Hot IPOs, started in the year 1998, when companies like eBay and theglobe.com opened their IPO deal. It can be mentioned here that eBay is listed in NASDAQ as EBAY and theglobe.com is listed as TGLO.