How do I sell IPO shares?
Investing in an IPO relies on buying and selling as very crucial aspects. Once the IPO shares have been allocated, you must wait for the right time to sell them and maximize the gains. The task may seem easy at first glance, but in fact, selling IPO shares requires a lot of strategic thinking and planning. This article will direct you to the things that you should think about before selling and how to make good profits from it, in addition to a set of steps that guide you on how to sell the IPO shares, accompanied by illustrative pictures.
What is an underwriting?
An initial public offering is a process in which a company turns from private ownership into public ownership by offering its shares for public purchase with the aim of obtaining new capital. A private company has a limited number of shareholders, which is restricted to specific individuals only. But once it becomes public, everyone can become a shareholder by applying for a share of it. There are two types of IPOs which are the fixed price offer and the built-in offer.
What should I consider before I sell IPO shares?
Before we dive into how to sell an IPO stock, let’s take a look at the factors that need to be taken into consideration.
Risks: Most market related investments carry high risks, so consider the risk aspect before you decide to sell the IPO shares.
Tax: Profits from sales of subscription shares are subject to tax, so make sure you understand the tax implications before selling your shares. If you sell your shares on the first day or within the first year of listing, you will incur ordinary income tax on the dividend, but if you have owned the shares for more than one year, you will be able to better manage your tax bill.
Emotion: Your emotional well-being can take a toll when your hard-earned money is on the line. You have to plan wisely before making any decision.
Sale Restrictions: IPO shares enter within a mandatory 6-month lock-in period from the day of the allotment. This lock-up period is set to avoid stock dumping which could cause a drop in the market value of the stock. It is advised to follow the reservation period and not choose early exit no matter what.
Brokers’ advice: Broker’s recommendations can save you from a lot of potential disasters and losses, so don’t underestimate their power.
How do I sell IPO shares?
Selling the most difficult stock can be a bit of a difficult task, you are constantly running away from whether to sell immediately or wait a bit. Here are some selling strategies that can come in handy when you decide to sell your IPO shares.
Sale on the day of listing
According to the research and surveys of many traders, selling on the day of listing is always better than selling two to three years later. In addition to being one of the simplest strategies, it saves you a lot of future losses and gives you enough money to invest in various investment tools in the future.
Sell enough to cover your expenses
Selling enough to cover your expenses is another great way to save money and stay in the race to earn profits. This strategy is to sell part of your stock to recoup your initial investment while keeping the other part as is. If you get 100 shares of an IPO at, say, $200, your total investment amount will be $20,000. If the market rate of return is 40% and offers a share price of $280, you can sell 71 of the 100 shares you own to recoup $20,000, then keep the other 29 invested for additional gains.
An installment sale of your shares may be beneficial as the sale takes place after the IPO company’s quarterly report has been published. This report analysis tells you an overall idea of whether the stock price is likely to go up or down in the next quarter.
Selling 50% in advance and 10% each quarter
Selling 50% up front and 10% each quarter is an effective way to sell your subscription shares in installments. Selling 50% upfront gives you enough equity to cover your expenses and may give you some extra money on hand, while keeping the other percentage returns that you can redeem every quarter.
How to sell IPO shares
The method of selling IPO shares may differ from one platform to another, but the basic procedures form a common ground between all existing trading platforms. The guide below will provide you with the basic steps that you must follow to sell the subscription shares from the Al Rajhi Trading application, accompanied by illustrative pictures.
- Log in to the application by entering your username, password and activation code
- Open the menu button
- Choose the investment icon
- Click on the IPO Services button
- Click the Sell IPO Shares button
- Click on the company name
- Accept the company details and press the “Next” button.
A pre-execution summary of the order will then appear which includes the portfolio number and the number of shares. If you want to continue, click Execute Sell Order
Disclaimer: The content of this article is for informational purposes only. The information provided should absolutely not be considered as investment advice or a recommendation. No warranty is made, express or implied, as to the accuracy of the information or data contained herein. Users of this article agree that Money Secrets does not accept responsibility for any of their investment decisions. Not every investment or trading strategy is suitable for anyone. See the risk warning statement.