How Long After IPO Can You Buy Stock (And Why)?

Exact Answer: After 150-180 days

Usually, IPO stocks are worthy and valuable investments but sometimes people tend to lose a lot of money.  Often when any existing or new company offers the public to buy the shares along with none of the shares included on the stock exchange, is known as Initial Public Offering(IPO).

The gain which is obtained through these shares is used by the company according to its needs such as to buy commercial land or new machinery and may also be used to pay the debts. The Company rewards those persons who have invested in the respective company by buying shares or sell the shares when the price is favorable for trading.

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How Long After IPO Can You Buy Stock?

Generally, buying IPO stock will be engaging. But employees cannot sell or buy IPO stock for at least up to 6 months. This period is termed as a lock-up period. This period is helpful to prevent employees from exhausting the stock.

The lockout period comes to an end when the owners can sell the stocks to the public. But once the IPO trading has begun, it can be bought by individuals or by any company similar to other stocks. One of the disadvantages of IPO trading is fluctuations in price.

The listing process of IPO contains series of steps before entering into the stock market, like choosing a bank to provide underwriting services, offering price, and list of shares to sell has to be decided by the company which issues it. When issues are transformed to market, analysts are recommended aftermarket stabilization, and the market is created for the stocks.

After 25 days, from the IPO, transformations to market competition commences. On the first day after the beginning of IPO trading, it is easier to buy a high number of stocks. There are few risks involved in buying stocks immediately after IPO. 

Before buying an IPO Stock, it is more important to review the business model of the company. A key point to consider is about the consistent profit or at least has a path to consistent profitability.

In Summary,

InvestorsDuration to wait
Large investorsCouple of days after IPO
Small investorsAt least after 150 days

Why do You Have to Wait That Long to Buy Stock After IPO?

The most important point to be noted is Securities and Exchange Commission or any other regulatory body did not make any mandatory rules regarding the lock-up periods. The company which is going to be public or which is required by investment banker has self-imposed it.

The main goal of a lock-up period is only to maintain high stock prices once the company goes public and also to stop flooding which is done by large investors which depress the stock prices in the initial stage. Compared to the public, insiders of companies own a high percentage of stock shares disproportionately. The consequence of this would impact the share price of the company drastically when it goes public.

To avoid this, a lock-up period is followed for at least 6 months. There is even more advantage of this lock period. It gives you more time to investigate the performance of stock. It may vary from the initial stage to the end of the lock-up period and if it does not meet your expectations, it also may be worth buying something else.

But if the stock price does not vary and remains the same till the end of the lock-up period, it would be a sound investment. A scenario may also occur if the earning season coincides with the lock-up period, where the insiders of the company can still be prevented from selling the shares even after the expiration of the lock-up period. But this happens only when the insider can access the non-public information and the material.

Conclusion

People who are doing small investments should also consider the pros and cons significantly before buying the IPO stock. Though Purchasing IPO stocks contains risk, it may be significant. And the most important point to consider is, if the first-day pop of an IPO is good, expecting the same profit until the last is worthless.

Most of the companies enter into IPO without having proper knowledge which results in huge loss. Often New IPOs have less history compared to older ones, which may be lead to difficulty in assessing it. This affects the new individual investors the most. It is always good to limit your respective position on any individual stock to a few percent of your holdings.

References

  1. https://academic.oup.com/rfs/article-abstract/12/2/227/1592936
  2. https://www.sciencedirect.com/science/article/pii/S0929119917302183

Last Updated : 23 February, 2024

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21 thoughts on “How Long After IPO Can You Buy Stock (And Why)?”

  1. The detailed overview of IPO stock trading provides clear guidance on the waiting period and the significance of the lock-up period. It’s crucial for prospective investors to understand these factors before making any investment decisions.

    1. Yes, understanding the listing process, trading risks, and the reasons behind the waiting period is essential for any investor. This article effectively communicates the key points for consideration.

    2. I completely agree, Duncan. The article has done a fantastic job of explaining the importance of the lock-up period and the potential risks associated with early IPO stock buying.

  2. This article has provided valuable insights into IPO stock buying and the significance of waiting for the lock-up period to end. An educational read that emphasizes the importance of thorough evaluation before investing.

    1. Absolutely! Informed decision-making is critical when it comes to IPO stock investments, and this article has delivered comprehensive information to guide prospective investors.

  3. The detailed explanation of the lock-up period and its role in maintaining stock prices post-IPO is quite enlightening. It underscores the need for patience and research when considering IPO stock purchases.

    1. Indeed, the emphasis on self-imposed lock-up periods and their impact on stock prices is thought-provoking. This article has presented a compelling argument for waiting before buying IPO stocks.

    2. A thorough understanding of the implications of lock-up periods is crucial for investors, and this article has effectively conveyed the significance of this waiting period.

  4. The thorough explanation of IPO stock buying and the implications of the lock-up period serves as a valuable guide for potential investors. It underscores the significance of patience and informed decision-making.

    1. Absolutely, Jim78. This article effectively communicates the importance of patience and thorough research in the context of IPO stock investments.

  5. A well-presented overview of IPO stock trading and the reasons behind the waiting period. It’s a reminder for investors to exercise caution and undertake thorough research before making any investment choices.

  6. The article’s detailed overview of IPO stock buying and the associated risks offers valuable insights for potential investors. It’s a reminder to carefully evaluate the pros and cons before making investment decisions.

    1. Absolutely, Carrie41. The risks and importance of thorough evaluation are crucial considerations highlighted in this article, providing a comprehensive understanding of IPO stock investments.

  7. The detailed explanation of the lock-up period and the various considerations for IPO stock investments offers valuable insights for prospective investors. A comprehensive guide for making informed investment decisions.

    1. Absolutely, Dean Martin. This article effectively highlights the significance of informed decision-making and the need for thorough evaluation in IPO stock trading.

  8. Such an insightful explanation of the IPO process and the timeline for buying stocks after the IPO! A great reminder to always review the business model of the company before making any investment decisions.

    1. Absolutely! It’s important not to rush into buying IPO stocks. The lock-up period allows for time to thoroughly evaluate the stock and make an informed investment choice.

  9. This article thoroughly explains the necessity of waiting before buying IPO stocks and the potential implications of the lock-up period. It offers a balanced perspective on investment considerations.

    1. The emphasis on the significance of the lock-up period and the need for informed evaluation is commendable. This article serves as a valuable resource for anyone looking to invest in IPO stocks.

  10. The article delivers a comprehensive understanding of IPO stock buying and the associated waiting period. It effectively communicates the importance of research and thorough evaluation for prospective investors.

    1. Absolutely, Donna Stevens. The emphasis on thorough evaluation and the risks associated with early IPO stock purchases is crucial for making well-informed investment decisions.

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