Below please find a description of how IPO shares are allocated (taken from Fidelity).

As a retail

customer, what types of IPO shares are you likely to receive?

Retail versus Institutional Split

-

IPOs are typically broken into two tranches of demand: Institutional

and Retail. Institutional investors typically receive the lions share of an

y IPO allocation. Historically, the

institutional to retail split is 90/10. However, the retail percentage can be higher or lower on a deal

-

to

-

deal basis.

Media Coverage

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A deal that receives a lot of media attention and that involves a well

-

known

company

is often significantly oversubscribed. This means that demand for IPO shares far outweighs

supply. In such cases, your odds of receiving an allocation of shares are greatly reduced.

Type of Offering

-

Certain types of IPOs, such as Master Limited Partners

hips (MLPs), Real Estate

Investment Trusts (REITs) and Business Development Companies (BDCs) can be more retail focused, so

institutional investors are not vying for as large a piece of the offering. Therefore, retail investors

typically have a better chan

ce of receiving an allocation of shares in these types of IPOs.

Directed Share Program Allocations

-

In some cases, an IPO issuer may choose to direct a significant

allocation of shares to existing investors or friends of the company. When this happens,

it typically

reduces the number of shares available to retail investors.

In addition to these factors, your brokerage firm will have its own criteria for determining who receives

an allocation of shares. Each customer who wants to participate in an IPO off

ering is evaluated and

ranked based on his or her assets and the revenue they generate for their brokerage firm. Typically,

customers with significant, long

-

term relationships with their brokerage firm will receive higher priority

than those with smaller o

r new relationships.

As you can see, several factors influence how IPO shares are allocated. Knowing how to read the IPO

prospectus (red herring) and understanding some of the other factors in play can help you set realistic

expectations for your chances o

f receiving an IPO allocation. It is also important to note that every IPO is

different and market conditions can play a role in how shares are allocated.