How Investment Banks Determine IPO Allocation: A Guide for Broker-Dealers

Understanding IPO allocation mechanics is crucial for broker-dealers serving retail investors. Here’s what you need to know about how investment banks distribute shares:

The Allocation Hierarchy

Primary Distribution (90%)

• Institutional investors receive the majority of shares
• Large pension funds and institutions are preferred due to:
  • Capacity to purchase large blocks
  • Long-term holding patterns
  • Operational efficiency

Retail Distribution (10%)

• Required to meet exchange listing requirements
• NYSE requires 400 shareholders minimum
• NASDAQ requires 450 shareholders minimum

Key Allocation Principles

1. Institutional Priority

Investment banks favor large institutions because they:

• Take substantial positions
• Hold shares longer-term
• Require fewer administrative resources

2. Retail Investor Selection

Preference is given to investors who:

• Participate regularly in multiple offerings

ETNA-ClickIPO Solution

Our partnership democratizes IPO access by:

• Providing direct retail investor participation
• Streamlining allocation processes
• Enabling broker-dealers to compete with institutional offerings

For broker-dealers, this means:

• Enhanced product offerings
• Increased client engagement
• New revenue opportunities
• Competitive advantage in the retail market

Ready to offer your clients institutional-grade IPO access? Schedule a demo to learn more.