"The first chance at IPO shares go to whatever clients of the brokerage participated in the private placement. If there are some left of a promising IPO after this, the house divides them up among their brokers, who reward their best clients with as many as they can get for them."
That's true. I opened an account at Dean Witter recently after trading
in an Internet account for quite a while. My main reason was to
obtain IPO shares before the open.
I selected the most active IPO broker in the local office (some don't
do IPO's, I was told), and promised her I'd play by the rules. For
example, "flipping" (immediately trading out of an issue if the price at
the open gaps up dramatically) is generally discouraged. It ruins the
broker's "index", i.e., points accrued on the broker's IPO scorecard.
As a broker's index falls, fewer IPO shares come their way. Holding
IPO shares for three months does wonders.
Another way to help your broker's index is to take secondary shares
when offered -- these usually aren't nearly as popular as IPO shares,
but build up the broker's leverage when the next hot issue comes up.
I've had the account since November 1997. She obtained 200
shares of VeriSign for me (a super hot stock), 100 Steelcase, 200
CuraGen, 50 Broadcom, plus several secondaries which have done
surprisingly well.
Does it work? For me, yes, on a small scale. Maybe if I had a multi-
million dollar account, I'd be pulling down more shares. In the
meantime, she has asked for shares of several upcoming Dean
Witter IPO's on my behalf. I've been very happy with the results so
far. |
