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Sunday, July 21, 2013

Here's how to apply for an IPO

Published on Jul 21, 2013

Market for initial public offerings is heating up; more launches on the way

THE local initial public offering (IPO) market is heating up, with two prominent listings - SPH Reit and OUE Hospitality Trust - launched last week.

More IPOs are expected in the coming months.

Here's a step-by-step guide on how to apply for these IPOs, with information adapted from the Singapore Exchange (SGX).

1 Open a broking account
You should open a stock broking account and Central Depository (CDP) account before applying for IPOs.

The broking account will allow you to trade the shares, should you be successful in your IPO application.

There are nine retail brokerages where an investor can open a broking account: AmFraser Securities, CIMB Securities, DBS Vickers, DMG & Partners Securities, Lim & Tan Securities, Maybank Kim Eng, OCBC Securities, Phillip Securities and UOB Kay Hian.

Most brokerages require the applicant to show up in person.

2 Open a CDP account
The CDP account is for the settlement of trades and it maintains all the securities you buy and sell on SGX.

If you are above 18 and not an undischarged bankrupt, you can apply by filling in a form for the opening of a CDP direct securities account.

You are able to apply for a CDP account with your broker personally with the necessary identification documents.

When you open your broking account, you will be required to fill in a CDP linkage application form.
The opening and linking of individual CDP accounts are free.

To trade, the CDP account has to be linked to the investor's broking account. There is no limit as to the number of broking accounts which can be linked to the CDP.

3 Check for new listings, read IPO prospectus
This can be done on the SGX website under the "Company Disclosure" section.
You can also find out when the offer ends.

From there, you can also view and download the IPO prospectus, which provides detailed information on the company seeking a listing.

The prospectus will also list the size and price of the offer, as well as highlight potential risks. Bear in mind that some IPOs are not open to retail investors.

4 Apply for the IPO
This can be done via ATMs or Internet banking with the three local banks - DBS Bank, United Overseas Bank or OCBC Bank - or by completing and submitting a printed application form.

The application must be done before the closing date and time, usually before noon on the day the offer ends.

The IPO application fee is $2 per transaction, and you must have sufficient cash to pay for all the shares you are applying for.

5 Check IPO ballot results
You will not necessarily get the number of shares you apply for, as it depends on the response to the IPO.

If an IPO has been substantially oversubscribed, you may receive a smaller number of shares on the basis of the ballot ratio, which is decided by the placement agent and a random selection process.
You may also end up with none.

If successful, the shares will be credited into your CDP account and you may start trading these shares on the listing date via your broking account.

If unsuccessful, the amount debited previously will be refunded and credited back into your bank account within 24 hours of the balloting date for electronic applications, and three market days from balloting date for printed forms.

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