When a private company wants to raise more money, they can go public by letting individuals to invest in their stocks. This is called an Initial Public Offering (IPO).
Before a company can do an IPO, they have to get approval from the Securities and Exchange Commission (SEC). If they want to be traded on the stock exchange, they will also have to get approval from the Philippine Stock Exchange (PSE).
If you’re interested in investing in an IPO, there are three ways to do this:
Through a broker
The first and most direct way is through a stock broker, which is a person or institution that’s licensed by the SEC to take care of transactions involving stocks. They’re the ones who do the paperwork and other complicated stuff for their clients.
These days, most brokers let you invest online. You can order stocks through your online account and pay for them through your account.
When investing through a broker, you’re not guaranteed to get stocks in an IPO even if you place an order.
This is because the PSE distributes the stocks among the different brokers. It’s possible for a broker to not get enough stocks to distribute among all their clients who want to take part. Some brokers will prioritize investors with bigger orders. Others will try to distribute the stocks equally among all their clients so you could also end up with less stocks than what you wanted.
One way to increase your chances is to place orders with multiple brokers.
Through the PSE Electronic Allocation System (EASy)
The PSE has an online platform called PSE EASy that is intended to let investors who don’t have as much money get a chance at taking part in IPOs. Every person is only allotted a maximum of PHP 100,000 worth of stocks per IPO. This prevents investors with a lot of money from snatching up all the shares.
To use PSE EASy, you’ll need to have a broker. You’re allowed to put orders both with your broker(s) and on PSE EASy to increase your chances.
Through a bank
For the last option, you can actually go to your bank. If they offer the service, they could order the stocks for you. You’ll have to do the paperwork if you go through this method. And if you get the stocks, you’ll receive physical copies of your stock in the form of stock certificates.
