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what do u define whether each individual IPO issue is hot or not? volumn?

A hot IPO would be oversubscribed (subscription volume in relation shares offered).

Actually, if pre-IPO pricing keeps going up, you know it is a hot issue. It they are lowered before the first trade, then you know it most likely a dud.

QuoteOriginally posted by: ppauperso it's only determinable after the event, ex post rather than ex anteThis is a subtlety that is often overlooked.A lot of the criticism about IPO pricing and distribution in the late 90's assumes that the underwriter knew ex ante that the IPO price would go much higher after initial distribution. This was certainly true much of the time, although there was more risk than is apparent in hindsight. In other cases, it wasn't true at all, the market was volatile and could have gone either way.If by "hot IPO," you mean one that is underpriced so an allocation is valuable, it should be defined ex ante. Due to the peculiarities of new issue regulation, the underwriter has quite a bit of information about demand for the IPO, but also quite a bit of uncertainty.If instead you have an ex ante definition, such as an IPO that was oversubscribed, or whose price appreciately sharply in the aftermarket, or even just one with a volatile price that caused a lot of excitment; then it's not necessarily true that getting an allocation was valuable.

I would argue that a hot IPO is not simply defined by high first day returns, which are simply evidence of underpricing, it is a long run and more subtle success story. From the issuer's point of view, i see 5 main criteria for a successful IPO:1. Long run stable price appreciation2. The capital required is raised by the issuer3. The volume traded is large but not unstable, i.e. no more than 15% of the total market cap traded on teh day of the IPO4. Diversified control - the new owners of equity should be diversified enough to include all key institutional investors, but not concentrated enough that one single party has too large a stake5. Timing - the IPO should come at the peak of IPO interest

These are reasonable qualifications for a successful IPO, although some might require balancing the interests of issuer, underwriter, old investors and new investors. But "hot IPO" is usually defined as one with very strong demand relative to the initial offering price, in other words one in which getting an allocation has a lot of economic value.

I have often (not always) heard and understood the word "hot" to be measured by a stock that is difficult or expensive to borrow. Someone who holds such shares can easily earn above the market interest rates to lend them out. Anyone here try to short GOOG in its first few months? I tend to think that this is actually a fairly good and measurable proxy for the factors that affect "irrational" IPO pricing.

I think Niederhoffer [Education of a Speculator] defines the hottest IPOs as those where you had to sleep with the brokers [or presumably supply a suitable proxy] in order to receive a full allocation of your order.

Most investment banks will refer to an IPO as a "HOT issue" when they have so much demand from clients that they will allocate a set dollar amount to each client regardless. Eg- $10K per client. I woudl not define a HOT issue as one that is oversubscribed, as the difference between "oversubscribed" and fully subscribed can be a matter of 1 application. Many oversubscribed floats trade below issue. To me the concept of a HOT issue is something used to describe an IPO before listing, and has nothing to do with the premium or discount the share trades at after listing although there is a very strong correlation between HOT issues and successful IPO's.