#82: Fidelity has SLASHED the IPO Eligibility Requirement! Here's How to Improve Allocations.

Craig Stephens (0:00)

Fidelity just slashed its IPO eligibility requirements, opening the door for thousands more IPO investors headed into Anthropic. But more access means more competition for shares. While digging through Fidelity's FAQs, I rediscovered a few details that help explain the scattered SpaceX allocations and give us a few action items to improve our odds of getting allocations in upcoming deals. In IPO radar news, investors push back on Nscale's valuation. Anthropic's leaked numbers reveal strong revenue growth, but an $80 billion loss, and Anduril launches a tender offer at a $90 billion valuation. Welcome to the Access IPOs Podcast, where we explore opportunities to invest in the world's most innovative and disruptive pre-IPO companies. I'm Craig Stephens, founder of Access IPOs, and Fidelity has lowered the IPO eligibility threshold, which could open up IPO access to hundreds of thousands, maybe even millions more investors, just as we're coming up on the Anthropic deal. For as long as I can remember, Fidelity has always required a 500,000 minimum balance in your Fidelity accounts to be eligible for IPOs. They just dropped it to 25,000. They lowered the eligibility to 2,000 for that SpaceX IPO, and that gave a ton of people more opportunities to invest in that deal, and maybe that was a bit of an experiment to come up with this new number of 25,000. I first learned about this from a Patreon member, shout out to Matt for pointing this out on Reddit. He said, they're reducing the minimum to participate in IPOs, 25,000. Surprisingly, they did this through Reddit, and they did it through X as well, but the Reddit announcement had a little bit of extra here. It says, the IPO market is on pace for its most active year since 2021 for new IPOs, and we want to give more customers access starting today, October 19th. 2021 was a massive year for IPOs. There was more than 1,000 deals, and a lot of those went out because there was a euphoria at the time, both in the private markets and in IPOs. And when that happens, the floodgates open and a lot of companies IPO. Fidelity has a very good sense of deals coming down the pipeline because they do a lot of late stage investing in companies that are going to IPO, and they get access to a lot of deals. And this echoes what Brett Tejpal said in last week's interview. He's a co-CEO of Institutional at Coinbase, and he said Coinbase had a healthy pipeline of IPOs coming, thanks to Brian Armstrong, the CEO, reaching out to issuers, reaching out to the investment banks to get access. So it'll be interesting to see first if Coinbase will offer access to this deal, and if they'll be in the S1. And we certainly expect Fidelity to be part of the Anthropic IPO as well. I'll be talking about Anthropic more in the IPO radar segment of the show. With this news, Fidelity updated their FAQs to show that new $25,000 threshold. And while I was there reading this, I read through the FAQs again, and there's something I overlooked or something I just haven't thought about in a while that hits different after watching the SpaceX IPO allocations go out to Fidelity customers. On my screen, you're looking at the data we collected in our Patreon. We had 83 or so survey responses with members of our Patreon community telling us how many shares they requested and how many shares they received. And these red circles are the Fidelity allocations. And I was perplexed by this, but having read through the FAQs, I think I understand a bit better now why it turned out this way and what we can do today to improve our chances. In a moment here, I'm going to share what I rediscovered reading through the FAQs again, how it applies to the SpaceX allocation. And I've come up with three or four ideas of things that we can do today to improve our chances of getting meaningful allocations in upcoming Fidelity IPO deals. But before we dig deeper into those FAQs, a quick word from a brand new sponsor of the show. Support for the show comes from AlphaPix by Seeking Alpha. Most of what we cover here happens before a company goes public, but after the IPO, it joins thousands of stocks to sort through. So if you're going to try to beat the market, where do you start? AlphaPix by Seeking Alpha is built for exactly that. The investment team uses data driven research to find top, large cap and lesser known gems to help members build portfolios that can outperform the S&P 500 Picks like Micron in October of 2025 is just one example that has crushed the market. When AlphaPix selects a stock, you don't just get the ticker, you get the comprehensive bullcase and investment thesis behind it. So you can decide if it's right for your portfolio. I use the AlphaPix factor grades, which look at five key ratings that help me identify or rule out stocks based on my investment criteria without screening thousands of stocks myself. Members get two strong buy picks every month, plus access to the full portfolio, its performance and automated alerts when ratings change. AlphaPix members also receive weekly portfolio updates and access to exclusive webinars with the Quantitative Strategy Team, where they break down the investment thesis for the latest stock picks and untangle macro conditions affecting the portfolio. As with any stock picking service, past performance is no guarantee of future results. But if your goal is to beat the market, get data-driven analysis from the research team that's already doing it. Use my exclusive link in the description or on your screen to save $50 off your annual subscription. Thanks a lot to our new sponsor, Seeking Alpha, for sponsoring the podcast. Let's take a look at the FAQs. A lot of us are maybe too impatient to pay any attention to the FAQs, but with IPO investing, it's usually the only place that we can get real information. A lot of these companies don't have like a dedicated landing page that talks about IPOs. And when you call the help desk, they don't really know what you're asking or what you're talking about. So FAQs is the best way to learn. And if you work with your AI, they're going to reference these FAQs. So you might as well look at it directly. Who's eligible to participate? Eligibility to participate in IPOs, follow-ons or secondaries is reserved for brokers customers with at least 25,000 in certain assets. This used to be 500,000 and they would say 100,000 for KKR deals, but that wording is gone. Let's scroll down on the page to how does Fidelity allocate shares? Now I went back into the way back machine on the internet to see if this has changed recently and it hasn't. And I've certainly read this before, but having gone through that SpaceX deal and seeing how the allocations were scattered, rereading it gave me a better understanding, I think, of why those SpaceX shares were allocated the way they were. I'm going to read here directly from the FAQs. Fidelity's allocation methodology and IPO system were designed to evaluate customers based on their relationship with Fidelity as defined by their Social Security number, or TIN. Each customer who participates in an IPO offering is evaluated and ranked based on the assets and revenue they have in accounts under their SSN. Assets include all retail assets under the individual's SSN and exclude assets that are in 401Ks or 403Bs. I'm going to pause there and just mention my personal experience. I had two old employer 403Bs and a 401A that were in my Fidelity account for years. And I waited to roll them over into my IRA for quite some time. But once I did roll them over, I will say that I think that my allocations got better because it bumped up the balance of my IRA. And that's usually where I make my requests. So if you have any old employer 401Ks or 403Bs sitting in Fidelity, roll that into an IRA. I think it could help with allocations. Same thing is true if it's outside of Fidelity and you have a Fidelity account, you could roll it into Fidelity. Now going back to revenue, says revenue is comprised of the brokerage commissions, which there really aren't commissions anymore since they got rid of commissions, margin interest and mutual fund revenue generated in retail accounts of the individual's SSN. So assets and revenue. So we've always known that if you have more assets in Fidelity, they're going to favor you when you request IPO shares. And that makes sense. The other brokers, they aren't really clear that they do that, but Fidelity says that they favor you if you have more assets. But also revenue. And the reason why I think this is important is that if your money is in Fidelity, but you have maybe 10 stocks, 10 individual stocks, you're not really making money for Fidelity, just holding those stocks. But if your assets are invested into Fidelity mutual funds, there's an expense ratio on that and higher the balance of those mutual funds, the more revenue that Fidelity is earning from you being a customer. And so presumably, Fidelity looks at all their customers and they can determine how much revenue every customer is generating for the company. And then they rank you based on that. And that's how they distribute IPO allocations. It goes on to say the allocation methodology is unfairly and equitably as possible. And then it says the size of a customer's indication of interest is not considered during the allocation, other than the fact that we will not allocate more. Therefore, you should only enter an indication of interest for the amount of shares you are interested in purchasing. This kind of goes against what I've been telling you for this whole podcast. I always say request more shares than you actually want. And I still think that holds true across the board for all these brokers. The more shares you request, the more you'll get if they give you a fraction of a share. But it's possible Fidelity has a different algorithm where that request size doesn't matter. And they instead look at this ranking system of assets and revenue generated as a Fidelity customer. And if it's written in the FAQs, I do think we have to believe it. So we should be requesting only the number of shares that we want to purchase and no more. And I would say that usually holds true for me because their minimum is 100 shares. And then it's in 100 share increments from that when you make an indication of interest. So 100, 200, 300 shares. That's a pretty big jump for a deal like SpaceX, which was $135.