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 ?
Sexual assault was the most common 'hot issue' with more than a dozen cases reported in eight months, The Herald Sun reports.
If it wishes to remain relevant, the festival needs to look beyond Queen Street West and aggressively court the broader Asian community, and even take a leadership role in the hot issue of media representation.
Disturbing stories are reaching me of men who, having smashed their relationships to smithereens by their own actions, are pursuing custody battles as yet one more episode in the war against their exes because fathers' rights are now a hot issue.
Disturbing stories are reaching me of men who, having smashed their relationships to smithereens by their own actions, are pursuing custody battles as yet one more episode in the war against their exes because fathers' rights are now a hot issue. Apart from the immense distress this causes, it damages the cause of the good fathers who only want the right to see their children.
WHAT A LINE-UP: From left, Uma Thurman, Cate Blanchett, Kate Winslet, Claire Danes, Scarlett Johansson, Rosario Dawson, Ziyi Zhang, Kerry Washington, Kate Bosworth and Sienna Miller; HOT ISSUE: Vanity Fair
One amendment, the 18th, ratified on January 16, 1919, was the hot issue of the day and attempted to legislate morality by prohibiting the "manufacture, sale or transportation of intoxicating liquors" within the United States.
Bush and his posse should be tried for treason for the countless crimes they have committed, but Guerriero thinks the hot issue is gay marriage.
In her presentation, Partnership not Patronage for Sustainable Development, she said health was a "hot issue".
This was a hot issue in Ohio last year, notes Bishop, a political scientist at the University of Cincinnati.
If you already have that relationship built, it is a lot easier to call them up when we have a hot issue. In addition to just calling them from time to time, there are several built-in opportunities, such as staying for the whole annual meeting, even after Trade Talk is over.
Energy policy became a hot issue when electricity prices skyrocketed and blackouts occurred in the West in 2000; then came the Enron debacle and concerns about national security after 9/11.
They also work on the hot issue of integration between Russians and Latvians, a legacy of the Soviet era when the Latvian language was only spoken at home and cultural traditions were not supported.