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Pre IPO Listings

Understanding what a Pre-IPO Placement is:

A pre-initial public offering (IPO) placement is a private sale of small or large blocks of shares or units before the stock is listed on a public exchange. The buyers are typically private equity firms, hedge funds, and other institutions willing to buy large stakes in the firm. These shares are often, in a small capacity, sold in the secondary market to retail traders. This is the focus of Rosenhof Partner’s Trading strategy.

Due to the size of the investments being made and the risks involved, the buyers in a pre-IPO placement usually get a discount from the price stated in the prospective for the IPO.

Overview of a Pre-IPO Placement:

From the viewpoint of a young company, a pre-IPO placement is a way to raise money before going public. It is also a way to offset the risk that the IPO price will prove to be optimistic and the price will not go up immediately after it opens.

  • A pre-IPO placement is a sale of large blocks of stock in a company in advance of its listing on a public exchange lik the NASDAQ or NYSE;

  • The purchaser gets the shares at a discount from the IPO price;

  • For the company, the placement is a way to raise funds, find new investors, and offset the risk that the IPO won’t be as successful as is hoped;

  • From the buyer’s viewpoint, the amount per share may be discounted from the expected IPO price. The caveat to pre IPO markets is also the proposition that there may be stock options or warrants to avail of;

  • Not many individual investors take part in pre-IPO placements. They are generally restricted to Hedge Funds, and their clients. These are high-net-worth individuals with a sophisticated knowledge of the financial markets;


The company, however, does not want these private buyers to immediately sell all their shares if their stock soars once it opens on an exchange. To prevent this, a lock-up period is generally attached to the placement, preventing the buyer from selling shares in the short-term.

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