Frequently Asked Questions about US IPO Subscription

1、What is IPO subscription? How to participate?

Currently, most companies go public by initial public offering (IPO), which is the first time a company offers shares to the public to raise capital by setting a price range for the offering.

"IPO subscription" means that an investor participates in an IPO and has the opportunity to buy shares at the finalized offering price on a listing day.

Unlike IPO subscriptions of China A-shares and HK stocks, conventional U.S. stock IPOs do not offer public subscriptions. This is because institutional investors dominate the U.S. stock market, and the previous new share offerings were generally placed only for institutional investors, a small number of individual investors with subscription capital of over one million U.S. Dollars. As for the retail investors, they face a relatively high entry barrier of subscription.

Tiger Broker(HK)only allows PI to subscribe USIPO.

Reminder: If you regard yourself as a "Restricted Person" (as described in FINRA RULE 5130/5131), you will be denied from subscribing new shares of U.S. stocks. For more detailed regulations and rules, please refer to FINRA RULE 5130/5131.

2、What are the capital requirements for IPO Subscription? How much money is needed for IPO Subscription?

The capital requirements for participating in the U.S. IPOs vary by account type, which means that clients need to have sufficient funds ("frozen funds" or "fund to be checked," depending on different genres of accounts) to satisfy the capital requirement.

(1) For the Prime Account - Margin Account, when clients submit subscription applications of U.S. stock IPOs, Tiger Brokers will check the available funds in their accounts and freeze the subscription margin required for U.S. stock IPO. The amount of frozen funds is calculated as follows:

The amount of frozen funds = subscription shares * freeze percentage *higher(lower) bound of the issue price range (the issue price range will be determined when the U.S. stock IPOs are open for subscription,the freeze percentage varies depending on the project, typically ranging from 80% to 100%).

Please note that if the frozen funds in your account are insufficient, the subscription application will be rejected. Please ensure that you have sufficient funds on your account before subscribing; if you use non-USD funds to subscribe after the successful allotment, you may incur foreign currency liabilities and loan interest. Therefore, please pay close attention to your account status .

(2) For the Prime Account - Cash Account, when clients submit subscription applications of U.S. stock IPOs, Tiger Brokers will check available USD cash and freeze sufficient cash amount required for U.S. stock IPO. The amount of frozen funds is calculated as follows:

The amount of frozen funds = subscription shares * freeze percentage * higher(lower) bound of the issue price range.

Please note that if the frozen funds in your account are insufficient, the subscription application will be rejected. Please ensure that you have sufficient funds in your account before subscribing.

[Example]: Xiaohu subscribes for 100 shares of Pinduoduo, with an issue price range of US$16-19 per share, and the subscription can be successful if the following amounts are met:

Prime Account - Margin Account(If higher bond and freeze percentage is 100%): The amount of frozen funds = 100*100%*19=1,900USD (Account margin value = 1,900USD)

Prime Account - Cash Account(If higher bond and freeze percentage is 100%): The amount of frozen funds = 100*100%*19=1,900USD

※Remarks:

  • Frozen funds: When a client submits a subscription application, Tiger Brokers will freeze a sufficient amount of funds to ensure that the client has sufficient funds for the shares once allotment is successful. Once the subscription funds are frozen, the client cannot use these funds for other transactions, i.e. that the client cannot use the frozen funds to buy other stocks or participate in other IPO subscriptions. If the client is unsuccessful with the ballot the frozen funds will be released automatically

  • What if the final price of a U.S. stock exceeds the issue price range?

When the final price of a U.S. stock does not exceed ±20% of the issue price range, the subscriber's application remains valid. If the final price of the U.S. stock exceeds ±20% of the issue price range, subscribers will need to reconfirm their subscription applications. If the subscribers failed to reconfirm their subscription applications within a defined period, the subscription applications will become invalid.

3、What is a successful allotment? How does it work?

A successful allotment is when an investor who subscribes for the IPO successfully alloted with all or parts of the shares subscribed for at the offering price on the listing day.

There are no statutory allotment rules for U.S. new issue shares offerings. It is up to the underwriters or distributors to decide how to allocate the new issue shares to the investors .

Tiger Brokers' new issue shares allotment generally operates on the following principles:

(1) as many investors as practicable are to be allotted with the new issue shares;

(2) the number of shares allotted to investors who applied for more shares would generally be more (and at least not less) than those subscribed for less.

In some US stock IPOs, due to certain reasons like participating in specific promotional activities organized by Tiger, special allotment assigned by the issuer, clients may be allocated with certain number of shares prior to other clients.

If there are accounts participating in the subscription of new shares in which Tiger is beneficially owned by 10% or more, the distribution of new shares (if any) by Tiger to such accounts will be made after Tiger's customers are allocated according to the above principles.

It should be noted that, subjected to various uncertainties in the distribution process of new U.S. IPO, the distribution mechanism of each new U.S. IPO may change. Investors who participate in the subscription of new shares may be allocated the entire subscription amount, may be allocated part of the subscription amount, or may not be allocated with any new shares. Tiger reserves the final right to interpret the distribution mechanism of new U.S IPO.

4、When will the listing price be determined? When will the allotment result be announced? What is the allotment process?

(1) The issue price of a the new U.S. stock is determined the day before the listing date;

(2) The underwriting group usually confirms the final quota and starts the allocation on the day of listing, so the subscribers will not know the allotment result until the listing date;

(3) Tiger Brokers' U.S. stock allotment process: Tiger Brokers' U.S. shares are first allocated by the underwriters to the Clearing Brokers of Tiger Brokers. When the Clearing Brokers obtain the shares, they will announce the ballot results as soon as possible and distribute the shares to subscribers in accordance with the rules.

Since Tiger Brokers launched U.S. stock IPO subscription services, the Clearing Brokers of Tiger Brokers have been receiving the allotted shares on the listing date, between 9:00 and 10:00 a.m. EST (i.e. 9:00-10:00 p.m. Beijing time during summertime). Once Tiger Brokers receive the allotted shares, allotment will be processed immediately. As the time of obtaining the the shares depends on the underwriters, Tiger Brokers unable to guarantee that the allotment of the new shares will be completed before the official listing time, and it is possible that the allotment may be completed several hours later than the official listing time.

5、What is the difference between the planned number of U.S. stock IPO and the final number of new shares issued ? What is the difference between the issue price range and the issuance pricing?

(1) The number of U.S. stock IPO is usually a the guided amount given by the underwriter in consultation with the listing company (i.e. the issuer) based on a combination of indicators, including but not limiting to market demand and company size. Before the shares are officially listed for trading, the issuer can adjust the issuance scale according to market conditions, and the final issuance number of shares may fluctuate between 80% and 120% of the originally planned amount.

(2) The U.S. stock issue price range is usually a guided range given by the underwriter based on company valuation, market factors, etc. Generally, the company will determine the final issuance price one day before the official listing date, and it is usually within the issue price range. However, in the event of if market fluctuations occur, the final price may fluctuate between 80% of the lower bound and 120% of the upper bound of the issue price range.

Example: Tiger Brokers (TIGR) was listed on Nasdaq on 20th March, 2019, and the final price was US$8, which was higher than the issue price range of US$5 - US$7.

Frequently Asked Questions about Tiger Trade's U.S. IPOs Subscription

Q: How to subscribe for U.S. Stock IPOs?

A: Investors can subscribe by using cash or purchasing power available (for Margin Account only) in the account . Currently, financing is not supported .

Q: How to participate in the U.S. Stock IPOs through Tiger Brokers?

A: Investors can check the U.S. stock IPOs through the Tiger Trade APP-[New Stock Subscription].

Q: When is the subscription opening and closing date ?

A: The subscription period of each IPO is different according to its roadshow schedule. Clients are required to pay attention to the IPO subscription information in timely manner.

The subscription time for U.S. stocks is relatively short. According to past IPO exercises, the subscriptions are usually opened 3-5 days before the listing of new shares, and the subscriptions will be closed 1-2 days before the listing of new shares. The subscription time is as short as 1 day or as long as 3-4 days. Please be aware that under certain circumstances, the underwriters may close or extend the subscription application period.

Q: What is the number of initial shares to be subscribed?

A: Generally, the minimum subscription quantity for a U.S. Stock IPO is 100 shares, and the minimum subscription quantity may vary for different U.S. stock IPOs and regulatory requirements. Clients can subscribe any quantity that is above the minimum subscription quantity and do not need to subscribe in integer multiples, i.e clients can subscribe for 102 shares, 120 shares, 150 shares, etc.

Q: What currencies does the U.S. Stock IPO support? Do I have to subscribe in U.S. Dollars?

A:(1) For Margin Accounts, if the account assets are sufficient, even if there are no U.S. dollars, the clients can still subscribe for the U.S. stock IPO directly.

Please be aware that if you participate in a U.S. stock IPO with no U.S. Dollars in your margin account and you allotted with the shares allotted shares are purchased with share financing. (i.e. borrowing U.S. dollars from Tiger Brokers). If you do not sell your allotted shares on the day you receive the shares , you may incur a financing charges. For more detailed information on financing interest, please refer to https://www.itiger.com/hk/commissions/fees/financing_interest_rates; If your allotment is unsuccessful, or sell the allotted shares on the day of the allotment, you will not incur financing charges.

(2) For Cash Accounts, clients can subscribe only in U.S. dollars. Clients can convert other currencies into U.S. dollars in the account before the subscription, and the U.S. dollar amount should meet the minimum amount required for a subscription.

Q: When I subscribe two U.S. Stock IPOs at the same time but have insufficient funds in my account,what are the rules for confirming the subscription?

A: Tiger Brokers will confirm the subscription in the order of the subscription application submission time.

Q: What is frozen funds?

When a client submits a subscription application, Tiger Brokers will freeze an amount of funds to ensure that the client has sufficient funds for the shares once successful allotment . Frozen funds are not deducted from the trading account . Once the subscription funds are frozen, the client cannot use this part of funds for other transactions i.e. client cannot use the frozen funds to buy stocks or participate in other IPO subscriptions or withdraw the funds. If the client IPO subscription is unsuccessful the frozen funds will be automatically released .

Q: When will the U.S. stock IPO subscription funds start to be frozen?

A: The required subscription funds will be frozen once the subscription application is submitted.

Q: How do I know the subscription status?

A: Clients who participated in the IPO subscription can check the subscription status through the Tiger Trade APP-[New Stock Subscription]. After the allotment result is announced, the status will be updated to: successful or unsuccessful. (You can also see the allocated shares in your holdings if you are allocated with the shares). Generally, Tiger Brokers will also notify clients of the subscription result via SMS and/or Push Notification after the result announcement.

Q: What are the various IPO Subscription Statuses ?

A: After submitting the subscription application, the APP will display the following statuses:

(1) Submitting: Indicates that the client has submitted the subscription application and is waiting for Tiger Brokers' review;

(2) Pending: Indicates that the client has submitted the subscription application but can still modify or cancel the application.

(3) Confirmed: Indicates that the subscription application has been confirmed, but the allotment result has not been determined. At this stage, the subscription application cannot be modified or cancelled.

(4) Partially confirmed: Indicates that the number of shares subscribed has been reduced to a sufficient amount as the margin is insufficient to support the original subscription quantity.

(5) Rejected: Indicates that the subscription application was rejected as the margin cannot meet the minimum subscription quantity requirements.

(6) Successful: Indicates that the client's application is successful and has been allotted all or part of the subscribed shares. There may be a slight delay in the arrival of shares.

(7) Unsuccessful: Indicates that the client's application is unsuccessful.

Q: What is the subscription fee for U.S. stocks?

A: For more details, please refer to: US IPO Subscription.

Q: Can Tiger Vault's purchasing power be used when applying to a new IPO?

A: YES.

NOTES:

  1. When using Tiger Vault to apply for an IPO, the part of the IPO frozen amount using Tiger Vault will enter the automatic redemption process aat the end of the subscription day,

  2. If the redemption amount is not received at the time of the IPO allocation day, financing interest may be incurred;

  3. The IPO does not guarantee the allocation amount. If the amount redeemed by Tiger Vault is less than the allocated amount when settled on allocation day, the insufficient part will continue to be redeemed from Tiger Vault and could generate financing interest;

Please make reasonable arrangements for subscription or manually redeem Tiger Vault in advance.(Applicable only margin account)

For specific rules, see Tiger Vault function introduction

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