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DEFINITION of 'Hot IPO'

An initial public offering that appeals to many investors and for which there is great demand. Hot IPOs are often oversubscribed - meaning market demand far exceeds the supply of shares - which results in the stock price surging as soon as it is offered on the market.

BREAKING DOWN 'Hot IPO'

The late 1990s saw one of the hottest IPO markets ever. There was so much demand for internet stocks that nearly all of them were oversubscribed, leading to substantial gains during the first days of trading. For example, Priceline.com saw its stock rocket 325% in a single day from an IPO price of $16 to $68/share. Because hot IPOs are in high demand, underwriters usually offer those shares to their most valued clients.

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RELATED FAQS
  1. How does an IPO get valued? What are some good methods for analyzing IPOs?

    The price of a financial asset traded on the market is set by the forces of supply and demand. Newly issued stocks are no ... Read Answer >>
  2. How does an underwriter syndicate work together on an initial public offering (IPO)?

    Learn how underwriting syndicates work together when helping a company undertake an initial public offering, and learn about ... Read Answer >>
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    The quick answer to this question is that an IPO can be shorted upon initial trading, but it is not an easy thing to do at ... Read Answer >>
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    Learn whether mutual funds can invest in IPOs. IPO investing is appealing because there is a big upside, but there is considerable ... Read Answer >>
  5. How can average investors get involved in an IPO?

    An initial public offering, or IPO, is the first sale of stock by a new company, usually a private company trying to go public. ... Read Answer >>
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