Hot Issue

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Hot Issue

An IPO for which demand heavily exceeds supply.

Hot Issue

A new issue that trades at a large premium to its original offer price. For example, suppose a company issues its IPO at $25 per share. If early trading on the secondary market is $50 per share, it is said to be a hot issue. These are relatively common during economic expansion or bubbles. They were especially associated with the dot-com bubbles in the late 1990s.

hot issue

A new security issue for which investor demand exceeds securities available in the issue. National Association of Securities Dealers rules forbid members from taking advantage of the likelihood that these securities will rise in price immediately after issue. See also Form FR-1, investment history, normal investment practice.
Case Study The stock market boom of the late 1990s produced some spectacular price gains, especially in new issues of dot-com companies. The quick and seemingly effortless road to riches of buying hot issues in the primary market and then quickly selling these same stocks in the secondary market resulted in substantial profits and was often accompanied by questionable dealings. In January 2002, following a ten-month investigation, NASD Regulation announced that it had censured and fined Credit Suisse First Boston (CSFB) $50 million for taking millions of dollars from customers in inflated commissions in exchange for allocations of "hot" IPOs. NASD claimed the inflated commissions amounted to an illegal profit-sharing arrangement with CSFB. The settlement also included CSFB paying an additional $50 million to the Securities and Exchange Commission. According to the charges CSFB instructed employees to give greater stock allocations to accounts that agreed to share their profits with CSFB. The profit sharing was disguised as inflated brokerage commissions on transactions unrelated to the IPOs. For example, in one instance a CSFB customer obtained an allocation of 13,500 shares in a VA Linux IPO. The customer subsequently sold two million shares of Compaq and paid CSFB 50¢ a share, or $1 million in brokerage commissions. The customer immediately repurchased the same Compaq shares at the normal commission rate of 6¢ per share. The customer's $880,000 in excess commissions paid to CSFB for the Compaq sale were more than offset when the VA Linux PIO shares were sold for a one-day profit of $3.3 million. In another instance, a CSFB customer paid a $650,000 commission to purchase one million shares of Disney shortly after receiving allocations of IPO shares of both VA Linux and FogDog. The 65¢ per share commission was substantially more than the client subsequently paid a different broker-dealer to immediately sell the Disney shares.

Hot issue.

If a newly issued security rises steeply in price after its initial public offering (IPO) because of intense investor demand, it is considered a hot issue.

References in periodicals archive ?
Current Hot Issues: Executive compensation disclosure, rating agency reform.
HOT ISSUES: Passionate on fighting poverty in Africa, says he is a Benn but not a Bennite - ie not as left-wing as his father.
With all the resources available within the Society, it seems to me that you could develop a think tank on hot issues affecting the profession.
The 12 essays presented here by Paau and Yee (respectively education studies and international relations, Hong Kong Baptist U., China) originally appeared in the Sino- US relations panels at the fourth Baptist-Tsinghua Joint Conference on "China in the World in the Twenty-First Century: Hot Issues in Contemporary China," held in May 2002.
Clearly free speech and tolerance are hot issues these days.
In Up in the Sky #1, 1997, for example, black-clad nuns ominously emerge from an indeterminate desert waste toward a mother and child; there's no clear narrative but a spectacularly artificial, carefully choreographed, hyperdetermined surplus of cues and hot issues. Memorably iconic, indeterminately sexy, profound image grabs are Moffatt's great gift.
While compliance issues may not be front burner items right now, they become hot issues if a complaint is filed or an audit is requested.
The story deals with the hot issues that our black teenagers struggle with today: alcoholism, low self-esteem, sex, STDs and teenage pregnancy.
Hicks gave the group an update of hot issues in the International area, addressing the recently issued transfer pricing service regulations and the FSC/ETI replacement.
Filtering out the "less well-informed" is apparently not a realistic option for pollsters, notes Bishop, since "it would probably not make good copy to report, again and again, that large numbers of citizens, and in some cases majorities, have no opinions" on the hot issues of the day.
Sometimes they may just shoot the breeze about the hot issues of the day.
A business roundtable will address hot issues such as foreign trade, satisfaction of OEM expectations, escalating worker insurance premiums, and technology advancements.