To buy shares of stock during a company's initial public offering, you must have an account with one of the firms underwriting the offering. The underwriter, which is typically an investment bank, purchases IPO shares of stock at a predetermined price from the company that issues the IPO. The underwriter usually sells the stock to the public through their affiliated brokerage houses.
Most underwriting firms sell IPO stock to their institutional clients and wealthy individuals, because these customers typically buy stocks in bulk, which generates larger commissions with less effort for the underwriters. These investors also have the financial resources to absorb the financial risk of IPOs and tend to invest long-term, according to the U.S. Security & Exchange Commission. In some cases, the broker may impose a penalty on if you decide to flip the stock on the secondary market and turn a quick profit.
In most cases, the average investor will not be able to purchase an IPO stock until it hits the secondary market in the days after the initial offering. Even If you have an account with one of the underwriting firms that caters to a high proportion of individual investors, you often need to have a minimum cash balance in your account to get an invitation to participate in the IPO.