How can I be the first in line to get shares of a company as it goes public with an IPO.

What is the key to being first in line to get the fresh shares of a company that is just going public with an IPO?

The frequency, variety and size of IPOs can serve as a telling barometer for investor interest in a particular company, sector or market.

As the name suggests, an "Initial Public Offering" refers to a company offering its shares to the public for the first time and enabling the stock to be traded on a stock exchange. Sometimes referred to as "going public," a company will do this in order to raise money and profile. And sometimes an existing publicly traded company

When investors buy shares through an IPO, the money goes directly to the company. When they buy shares by way of a trade on a stock exchange, the seller of the shares gets the money.

Once the company is established, going public is a way for investors to get their own money back and to pay back the people who gave them the initial funding.

In an IPO, companies write a prospectus that outlines the nature of the business, profiles the principal executives and reveals the company's financial situation and its prospects.

The prospectus includes a "use of proceeds," this information will be provided to the public to show what the proceeds are going to be spent on or have been spent on. This will let you know the risk factors to keep in mind.

The underwriters hired for one or more brokerage firms will remove all risk from the share issuer by guaranteeing a certain price for a certain number of shares.

One sign that an underwriter is desperate to get rid of the shares is that they are willing to selling shares to just about anyone. That anyone is often the individual investor.

If banks start throwing shares at you for one reason or another, especially if you would not normally get them, the first thing that should cross your mind is, "What is wrong with this picture". Why would they sell me this? If your brokerage firm starts offering you IPO shares when you have not had access to them in the past, tread carefully.

You might be a buyer of last resort in an IPO underwriting. In this market, you should use more than a little skepticism in evaluating anything that is offered to you.

The underwriters also handle the distribution of shares to the public. They do all this for the required fee. This fee can be quiet substantial to the underwriter. It often runs about 6-7% of the value of that IPO.

That is why brokerage firms and investment banks love the underwriting business. When they take part in an underwriting deal, it can be worth tens of millions of dollars.

Investors who are interested in IPOs should call up their brokers and ask to be notified of coming offerings. However, investors should also be aware that some IPOs are "oversubscribed." That means that public interest in the offering is so great that the entire offering of shares could have been sold many times over.

Underwriting brokerage firms usually dole out chunks of popular IPOs to their best clients. Sometimes, investors who ask for 1000 shares of an IPO will be allowed only a few hundred shares as the brokerage firm rations its shares.

If you miss the IPO, you will have to buy shares in the market once trading begins Be aware that some underwriters frown on investors flipping popular IPOs on that first day of public trading to take a quick profit. Those investors may find themselves shut out of future IPOs.