IPOs - Speak The Basics (Very Good Reading) (3)

Direct Public Offering (DPO) -

An offering in which a company sells its shares directly to the public without the help of underwriters.

Can be done over the Internet.

Liquidity, or the ability to sell shares, in a DPO is usually extremely limited.


Flipping -

Buying an IPO at the offering price and then selling the stock soon after it starts trading on the open market.

Greatly discouraged by underwriters, especially if done by individual investors.


Greenshoe -

Part of the underwriting agreement which allows the underwriters to buy more shares - typically 15% - of an IPO.

Usually done if a deal is extremely popular or was overbooked by the underwriters.

Also called the overallotment option.



Gross spread -

The difference between an IPO's offering price and the price the members of the syndicate pay for the shares.

Usually represents a discount of 7% to 8%, about half of which goes to the broker who sells the shares.

Also called the underwriting discount.




"By Darren Chervitz, CBS MarketWatch"