To participate in a public offering through E*TRADE Securities, you need to complete the following three steps in order.
1)Fill out your Customer Profile
2)Review the Preliminary Prospectus
3)Place or change an indication or Interest in the Offering.
Consider Your Investment Objectives
Public offerings can provide high returns but also involve potential risks and may not be appropriate for every investor. E*TRADE is not recommending or endorsing any particular investment by making it available to our customers. As with any investment you make through E*TRADE, you must determine whether a new or secondary issue equity security is consistent with your investment objectives and risk tolerance.
Frequently Asked Questions (FAQs)
What is a Public Offering?
How are Public Offering Shares Sold?
Who is eligible to participate in a Public Offering at E*TRADE?
How is my eligibility for participation determined?
If I am not approved to participate in a particular Public Offering can I submit another profile?
How do I invest in public offerings through E*TRADE?
How do I receive the preliminary and final prospectus?
Can I change or cancel my indication of interest once it is placed?
Can I cancel or change a Firm Order?
Can I purchase shares in a Public Offering on margin?
How are the shares allocated?
When will the offering be priced, so I can have enough funds available?
Will the issue definitely be priced within the estimated offering range?
When will my account be updated to reflect the stock purchase?
When can I sell the shares I receive?
How do I contact E*TRADE with Public Offering related questions?
What is a Public Offering?
Companies often find the need to raise new capital to support current operations, expansion or new business opportunities. An initial public offering (IPO) of stock is often chosen as the vehicle to raise a substantial amount of cash to implement a company's growth plans. After an IPO, a company may still find the need to raise additional cash and may choose to have a secondary (also known as a follow-on) public offering. A follow-on offering is simply a public offering of new issue equity securities by a publicly traded company.
Underwriters, usually investment banks, are hired by companies to help them issue new stock to the public. Underwriters play a critical role in this process. First, they provide the company with procedural and financial advice, then they buy the issue, and finally resell it to the public. An underwriter's "value-added" is its ability to gauge the public's receptivity to the new issue and properly price and place those shares.
Traditionally, Public Offering shares have been distributed to institutional clients, E*TRADE is a leader in allowing the individual investor access to Public Offerings.
How are Public Offering Shares Sold?
To protect investors, the Securities and Exchange Commission (the SEC) requires that companies file a registration statement with them before they issue public offering shares. This registration statement contains detailed information about the issuing company and it's business. The SEC will review the registration statement and an accompanying prospectus to ensure that they conform to certain legal requirements. Once the SEC has reviewed these documents the issue can be cleared for sale (The SEC will neither approve nor disapprove an issue, nor will it guarantee the accuracy of disclosures, it will only clear it for sale). Only when the issue has been cleared for sale (when registration has become "effective") can the shares be priced and firm orders for them be accepted.
During the pre-effective period, when the registration has been filed with the SEC but the issue has not yet been cleared for sale, interested parties can be provided with the preliminary prospectus. The preliminary prospectus contains detailed information about the offering company, the estimated date of issue and the estimated price range of the issue. During this time interested parties can place indications of interest for the offering. An indication of interest isn't a firm commitment to buy at this stage. Only when registration becomes effective and the issue is priced can firm orders be accepted.
The time between when the issue is cleared for sale, priced and when it begins trading in the secondary market is typically quite short. To ensure that all customers who wish to participate are able to enter orders, E*TRADE will gather all current indications on our records at the time of pricing and convert them into firm orders for participation on a "when and if" basis; when the issue is cleared for sale and if the offering's price is at or less than the limit price indicated.
Accepting indications on a when and if basis has been implemented to accommodate customers that cannot be reached during the brief window between pricing and secondary trading. Therefore, when placing your indication of interest please remember that all open indications that are at or below the offering price will become firm orders for participation. All indications can be changed or canceled at any time prior to the time of pricing.
Who is eligible to participate in a Public Offering at E*TRADE?
Public offerings are considered speculative investments and can be extremely volatile. For that reason they are highly regulated. Only U.S. -resident E*TRADE customers with access to the Web and with individual, joint, trust or IRA accounts who meet certain financial and investment criteria are eligible to participate in public offerings.
How is my eligibility for participation determined?
To determine if you meet the specific guidelines, please complete the online Customer Profile for each account. Eligibility will be based on responses to your Customer Profile regarding your investment objectives, financial background, and possible affiliations with the issuing company or with a brokerage or banking institution. If your Customer Profile has been judged ineligible it is because of your responses in one of these areas. To protect the integrity of the approval process we are unable to be more specific about individual profiles.
Because the 'Customer Profile' step for participation must be completed on a per issue basis, it is available only when there are specific offerings available.
You will be notified immediately of your eligibility to participate in this particular offering upon completion and submission of the Customer Profile. Eligibility to participate in this particular offering does not impact your other investing activities at E*TRADE in any manner.
If I am not approved to participate in a particular public offering can I submit another profile?
It depends. If you have more than one account at E*TRADE, you can select another account to participate in the public offering and submit an eligibility profile for that account. The reason for this is that you may be a registered owner of several E*TRADE accounts with different financial objectives. As a result, if a profile is judged unsuitable for participation, we only restrict that particular account from participating, rather than all of your accounts. However, this only applies if you have multiple accounts with different registrations with E*TRADE. If you have a single account with E*TRADE, then you cannot submit another profile for the same offering or make changes to the profile once you are restricted from participating.
How do I invest in public offerings through E*TRADE?
To invest in public offerings, interested participants must submit a Customer Profile. This profile helps E*TRADE determine suitability for a new offering in accordance with SEC guidelines. You will be notified online immediately of your eligibility to participate in each particular offering as soon as you submit the completed profile. After passing eligibility you can review the preliminary prospectus online. Once you acknowledge having read the preliminary prospectus you can place an indication of interest in the issue. This indication provides E*TRADE and BancAmerica Robertson Stephens with information about the maximum number of shares you are interested in purchasing and the maximum price you are willing to pay for these. You can change or cancel this indication at any time up to the time the issue is priced. At the time of pricing E*TRADE will convert all current indications in our records into firm orders to participate, subject to the issue being priced within your specified price parameters. Allocation of shares to individual accounts depends upon the number of firm orders received.
How do I receive the preliminary and final prospectus?
Public offerings are made available to E*TRADE customers through our Public Offering Web site. The preliminary prospectus is available at the Web Site once you complete Step 1: Customer Profile. You may review the preliminary prospectus on-line, download it or print a copy of it. Once a public offering is effective and priced, the final prospectus will be posted at the site as soon as it is available.
Can I change or cancel my indication of interest once it is placed?
Yes. You can change your Indication of Interest anytime before the offering is priced (which usually occurs on the afternoon before secondary trading begins). To change your Indication of Interest, go to the Public Offerings Home Page, select the appropriate account number, and click on Step 3 "Place Indication of Interest". From here you can choose to cancel an open order by clicking on the Cancel Current Order button or can change the number of shares you are interested in by re-entering your order and approving it.
Can I cancel or change a Firm Order?
No. Once the issue is priced and your order becomes a Firm Order, it is regarded as a final buy order and cannot be changed or canceled.
Can I purchase shares in a public offering on margin?
No. Shares in a public offering must be purchased with cash available in your account. You will need to have sufficient cash available to cover your Firm Order. Otherwise, your order may not be filled entirely, if at all.
How are the shares allocated?
E*TRADE's goal is to allocate shares evenly amongst all interested participants. For this reason the process takes place in rounds; in the first round, we allocate 100 shares to each order submitted in the sequence indications of interest were entered. In the second round, we allocate another 100 shares to each order greater than 100 shares. This process is repeated until all orders are filled or until we run out of shares to allocate, whichever occurs first.
When will the offering be priced, so I can have enough funds available?
E*TRADE will always post the expected offering dates on our site based on the most current information available. However, please be aware that these dates are estimates and can in no way be guaranteed. E*TRADE will make our best efforts to keep all customers up to date in all pricing developments.
Will the issue definitely be priced within the estimated offering range?
The estimated pricing range posted is based on the information provided in the preliminary prospectus. This is subject to change and the issue may be offered above or below this range.
For this reason, interested customers can place their indications subject to price limitations. At the offer indicates that you would like to participate at whatever the offering price is. Limit or better indications will only be converted to firm orders if the public offering price is at or below the limit indicated.
When will my account be updated to reflect the stock purchase?
Public Offering shares are usually allocated on the night before the issue begins to trade publicly. When this is the case you will receive a message reporting your allocation, and your Portfolio Summary and Transactions will reflect the allotment.
In situations where registration becomes effective and shares are allocated during market hours E*TRADE intends to use it's best efforts to notify customers of their allocation before public trading begins. From time to time however this will not be possible and E*TRADE will notify customers of their allocation as soon as possible. Public offering shares cannot be sold before customers receive notice of allotment.
When can I sell the shares I receive?
Once you receive notification of your allocation and the offering begins to trade in the secondary market, i.e. on an exchange, you can sell your allocated shares. However, one of the most important goals of the underwriting syndicate is to try to ensure a degree of price stability for new issues. For that reason E*TRADE and BancAmerica Robertson Stephens would prefer that customers hold their allocated shares for at least 30 days. E*TRADE will not in any way impede the sale of shares within this time, but customers with a record of short holding periods may be excluded from future offerings.
How do I contact E*TRADE with Public offering related questions?
E*TRADE has a special number exclusively for Public Offering support questions. When there is an offering available please call us between the hours of 9am to 8pm EST at 1-888-707-8680, or contact us via email at PublicOfferings@etrade.com.
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