Finance: What is a hot issue?

What is a hot issue? A hot issue is basically just an IPO that people are really psyched about. This does not necessarily mean that the company is really successful; just that investors are excited about the opportunity to invest because they know the price will jump quickly. So, these companies typically see a big increase in the beginning prices of their issue.

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Transcript

00:18

all the time Yeah It's an aipo that everybody wants

00:22

Why Well it's basically free money to the investors Price

00:27

talk has been ten to twelve dollars a share And

00:29

well then it looks like it's moved twelve to fifteen

00:31

and out price doc's fifteen to eighteen a share And

00:34

traders are mumbling that the first actual traded print will

00:38

be something like forty dollars a share So anyone who

00:41

buys at that eighteen dollars price or really any price

00:44

upto thirty thirty two thirty five something like that Well

00:47

they'll make a massive return for one day's work just

00:50

flipping their stock Tio you no longer term holders I

00:54

think about the real estate show where they flip houses

00:57

you know Well they have to do a whole lot

00:58

of work to flip a house on stocks are a

01:00

lot easier Well why do hot issues even happen Well

01:03

often banks purposely underprice i pose to quote pay the

01:08

street unquote for taking risk and buying that aipo handsomely

01:13

like they price it low Lots of people are going

01:15

to buy it have a low cost basis and remember

01:17

it fondly Well cos generally play along instead of selling

01:21

say thirty forty fifty percent of themselves to the public

01:24

in there i po well they only sell ten percent

01:27

and later on they'll sell more when the stock is

01:29

popped and traded and settled and has a buying public

01:32

and all the other good things that go with it

01:34

so and only a tiny amount of shares out there

01:36

trading even modest demand can drive prices to the sky

01:41

and this phenomenon happens Ah lot ebay snap facebook A

01:45

whole bunch of others essentially created hot issues by offering

01:49

very tiny fractions of ownership of themselves to the public

01:52

in there i po so that the enormous buyer interest

01:55

almost guarantees more demand than supply of the security being

01:59

sold and hot issues as you guess our great well 00:02:03.51 --> [endTime] until they're not