RE: Sales Today9 Jun 2020 00:01
Retail clients may call them wideboys, I call them professional investors.
To IPO flip you open an account with a Prime Broker that allows IPO trading. Many do.
The client has to sign FCA forms confirming they are a professional investor.
The Prime Broker onboards in accordance with FCA rules.
The trader is given a margin rate which can be 5% for large cap equities, 2.5% for bonds and maybe 20% for small caps like Bids.
That means the trader/investor can subscribe for 5 times his money on a Bids placing.
Puts up £50k he subscribes for £250k.
Gets 60% allocated and he gets £150k of stock.
Prime Broker allows him to sell following day and the IPO trader makes around 10% plus.
Prime Broker will charge funding, commission on the trade executions above normal rates and borrow fees to effect settlement of the sale before stock is received.
And they move to the next placing/IPO etc.,
That’s it.
Some may not like it but it is a valuable service they provide.