Underwriters are given a number of tools to support prices. Declining prices are a sign that the IPO may be in trouble. Investors may wish to monitor price activity from the sidelines before placing orders. When entering orders for an aftermarket IPO, it is wise to use limit orders. The new issue's volatility can cause dramatic price swings and market orders can be executed at unsustainable intra-day highs.
Many investors prefer to wait until lockup expiration before purchasing a new issue.
Lockup is the restricted period in which insiders cannot sell stock. In general, lockup lasts 180 days from the offering date. After lockup, restrictions remain on the amount of stock some insiders can sell. Often, Wall Street anticipates insider selling at lockup expiration and prices decline. Buying on the lockup expiration dip has been a profitable strategy.