Pre-IPO Placement

AAA

DEFINITION of 'Pre-IPO Placement'

When a portion of an initial public offering (IPO) is placed with private investors right before the IPO is scheduled to hit the market. Typically, these private investors in a pre-IPO placement are large private equity or hedge funds that are willing to buy a large stake in the company. The size of the investment means the price paid for shares in a pre-IPO placement is usually less than the prospective IPO price.

INVESTOPEDIA EXPLAINS 'Pre-IPO Placement'

It may seem like these private equity and hedge funds would be able to turn around and sell the shares at a higher price right away, but generally there is a lock-in period attached to the placement. This lock-in period prevents the funds from selling the shares in the short-term and tends to help attract investors who are looking to invest in the company for the long-term.

RELATED TERMS
  1. Halted Issue

    A planned security offering that does not go forward as planned. ...
  2. Death Star IPO

    A company's highly anticipated initial public offering (IPO) ...
  3. Shadow Market

    An unregulated private market in which investors can purchase ...
  4. Follow On Public Offer - FPO

    An issuing of shares to investors by a public company that is ...
  5. Prospectus

    A formal legal document, which is required by and filed with ...
  6. IPO Lock-Up

    A contractual caveat referring to a period of time after a company ...
Related Articles
  1. Retirement

    Pages From The Bad CEO Playbook

    Excess compensation, golden parachutes, tunneling and IPO spinning make these bad executives even worse.
  2. Investing Basics

    Why Companies Stay Private

    Many private companies prefer to stay private and find alternate sources of capital. Find out what firms have to gain by eschewing the windfall from a flashy IPO.
  3. Fundamental Analysis

    Interpreting A Company's IPO Prospectus Report

    Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.
  4. Investing Basics

    IPO Lock-Ups Stop Insider Selling

    Ownership plays a key role when companies go public. Find out how.
  5. Investing Basics

    Social Media: High Risk, High Potential Returns

    Carefully selecting social media ETFs can provide you with the opportunity to diversify your portfolio and enjoy financial rewards due to user growth.
  6. Investing Basics

    Understanding Private Placement

    Private placement refers to offering and selling shares in a company to a small group of sophisticated buyers.
  7. Entrepreneurship

    JPMorgan vs. Goldman Sachs: A Tale of Two Stocks

    The performance of JPMorgan and Goldman has been impressive, but one has a slight edge.
  8. Investing

    4 Hottest IPOs in 2015

    Where is smart money headed this year? These are the most anticipated IPOs of 2015.
  9. Investing News

    Investing In Social Media Startups? Read This First

    Several new social media startups are attracting large amounts of funding, based on their prospects of retaining a large user base and generating profits.
  10. Mutual Funds & ETFs

    These 4 Precious Metals ETFs Help Combat Inflation

    A look at 4 precious metal ETFs to combat inflation when it hits.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center