What time do IPOs start trading? That’s the question eager investors ask on the morning of the big day.
An IPO culminates years of hard work building a private company. It’s also a commencement — a hopefully long and profitable road as a public company.
The IPO is just one day. But preparing for that day takes several months.
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What Time Do IPOs Start Trading?
Underwriters finalize the IPO price the evening before a new company begins trading. The IPO price is what participating investors (the lucky few) pay to own the stock.
The next morning, broader market investors are often eager to buy the stock or watch the price fluctuations.
Multiple factors affect the timing of the opening, which we’ll discuss in the section below.
IPOs usually occur on Tuesdays, Wednesdays, and Thursdays.
But IPOs do not start trading at the market open. The opening trades generally happen in the late morning or early afternoon on the IPO day.
To get a more precise answer, I looked at seven high-profile and high-demand IPOs over the past few years to get some data points to narrow in on the average opening time.
The average time that these IPOs started trading was 12:52 PM ET.
Here’s the data:
The author sourced this data from reporting on these IPOs as they happened. I searched for reliable data on other IPOs and could not find a reference source.
These are large market capitalization and high-demand IPOs. Therefore this data sample may not be indicative of low-profile and smaller IPOs.
Much of it was collected during the IPO euphoria of 2020 and 2021, which may have led to more difficult price discovery and taking longer to open the stocks to begin trading.
As I report on additional IPOs in the future, I’ll update the data set and recalculate the average.
Here’s a look at how these stocks have performed since their IPOs:
3 Factors Affecting When IPOs Start Trading
Three primary factors affect when IPOs start trading on the IPO date.
1. Investor Demand
High-demand IPOs take longer to open. This is due to the challenging conditions for underwriters to conduct price discovery at the open.
Underwriters look at trade order volume to determine where the new stock price will open relative to its IPO price.
A successful IPO will see orders place above the IPO price. Unsuccessful IPOs, such as the Uber IPO, will see the opening trades below the IPO price.
However, underwriters don’t want the first trade to open too far above the IPO price because they would have left money on the table. Airbnb, for example, could have raised more money in the IPO as the first trade was up over 100%.
2. Offering Size
Larger IPO offerings raising more money tend to take longer to open. Higher share and trade volume can impact the ability of underwriters to open the stock.
3. IPO Price Accuracy
IPOs that open closer to their IPO price tend to open earlier than mispriced IPOs. For example, in our data set above, the two lowest price openings opened the earliest relative to their IPO price (UBER, HOOD).
The two highest opening prices (as a percent) relative to their IPO prices opened the latest (ABNB, SG).
Conclusion – What Time Do IPOs Start Trading?
The best data-driven answer I can provide to the question of what time do IPOs start trading, for now, is early afternoon, at an average time of 12:52 PM ET.
As I continue to report on upcoming IPOs and monitor the openings, I’ll update this table and the average time.
Featured image via DepositPhotos used under license.
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