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Technology Stocks : Winstar Comm. (WCII)
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To: limtex who wrote (10780)3/17/1999 2:46:00 PM
From: GVTucker  Read Replies (1) of 12468
 
limtex, RE: overallotments, et. al.

In order to make a secondary go over well, the underwriter often sells more shares than are technically being offered by the company. That puts the underwriter short the stock. When the inevitable "flippers" sell the shares they acquired on the opening, the underwriter can buy these shares at the offering price (at a minimum) and not be risking capital, since they are covering their short position.

That is why a) WCII help up for a few days after the secondary and B) why, when the underwriter had covered their short position completely, there was no support at all for the stock, and it tanked.
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