djrez4 wrote:Personally, I don't touch IPOs unless I can get in on the actual IPO itself. Otherwise, you're not really participating in the IPO; you're just buying shares on the open market.
djrez4 is right here, and the distinction is very important. Sometimes a market inefficiency is created when bankers convince a company's execs that it is better to sell the shares to the IPO investors at a bargain price. When the stock goes up right away, it is a big happy news story that gives the company good press and makes other investors eager to buy the stock later on the open market or on a secondary.
I don't know how much of Alibaba is being offered, but in recent years many companies have done 'trickle' IPOs where only 5-15% of the company is sold to the public in the IPO. The rest is sold later. To the selling shareholders, an underpriced 'trickle' IPO can make sense because it increases the probability of getting a very favorable price later on when investors are excited for the secondary. Selling 10% of your shares first for a low price and selling the other 90% later at a high price makes more sense than trying to get an average price for all 100% at once.
But, if you're buying shares on the open market, even 24 hours after the IPO buyers have participated, you're paying the market price, not the low price created by the inefficiency.
You don't need a big portfolio to get into some IPOs - ones where not a lot of people are interested. But you do need a big portfolio / a ton of commissions to get into the popular ones - Facebook, Alibaba, etc.
'Crowd' IPOs - where a company uses an auction setting to sell shares to anyone interested in an IPO and doesn't use a bank to negotiate share placement with clients - may be good way for small investors to access IPOs. However, you still would need to know a good deal about the company.