There are three types of IPO, and your ability to take part in each one differs depending on what they are.
Institutional investors are usually big companies or organisations that invest money on behalf of others. During a normal IPO, they get early access to participate with the opportunity to buy shares directly from the company going public. If you’re asking what an institutional investor is, it’s likely you’re not one! As soon as the company hits the US share markets, it becomes available for all everyday investors to buy and sell shares. With Hatch, you can now be among the first in the world to request IPO shares along with the big guys!
Direct public offering (DPO)
Like an IPO, a DPO - meaning direct public offering, also known as direct placement - is a method a company uses to raise capital. It differs from an IPO in that rather than offering new shares, which are underwritten (by underwriters such as investment banks like Morgan Stanley and JP Morgan) it gives up a portion of its current shares directly to the public to raise funds. This makes it appealing to smaller companies that would find a typical IPO expensive because it skips the (costly) investment banks. Because it is less restrained by a bank’s or venture capitalists’s funding, the company selling shares sets its own terms for the sale. This process comes with drawbacks and risks, and as with any decision to buy shares, always do your research.
Special Purpose Acquisition Company (SPAC)
A SPAC, or Special Purpose Acquisition Company, is essentially a shell company set up by investors with the sole purpose of raising money on the share markets to merge with a private company and take it public. They are faster than a traditional IPO but are sometimes less transparent in their processes, releasing less information to the public. SPACs themselves make no products, offer no services and don’t sell anything.