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Microcap & Penny Stocks : Tokyo Joe's Cafe / Societe Anonyme/No Pennies -- Ignore unavailable to you. Want to Upgrade?

To: changedmyname who wrote (80923)	6/29/1999 9:43:00 AM
From: Ed Swanson	Respond to of 119973

Stripping the fun right out of what has always been an old-boys' network? - Fun for who? IPO guru sees no fun in open IPOs By Peter D. Henig Redherring.com June 28, 1999 Tom Taulli, senior IPO guru at Edgar Online and the author of Investing in IPOs, a recent how-to book on investing in the IPO market, recently shared his views with Redherring.com on innovations and trends in the public offerings market. IPO guru sees no fun in open IPOs Investment bankers say yes to YesMail.com IPO week in review: roller-coaster ride Traditional IPO trading has become the latest industry to fall prey to the Internet's disintermediation. Wit Capital (Nasdaq: WITC), ETrade's (Nasdaq: EGRP) EOffering, DLJdirect (NYSE: DIR), and soon IPO.com are all gunning to open up the IPO market to online traders. Meanwhile, W.R. Hambrecht & Co. is testing out a new Dutch auction standard for pricing deals like Ravenswood Winery (Nasdaq: RVWD) and Salon.com (Nasdaq: SALN). Mr. Taulli, who has more than 10 years of experience in IPOs, marvels at the changes, but wonders if all of the so-called innovation isn't stripping the fun right out of what has always been an old-boys' network. The insider network creates big opening-day pops for IPOs. EOffering reduces the cost of underwriting an IPO by using the Internet. The changes in the IPO market push Merrill Lynch online. Goldman Sachs owns 20 percent of Wit Capital. TAULLI SPEAKS Everybody must be asking you about the changes in the IPO market, the OpenIPOs, the Wit Capitals. What do you think of them? I love that we're seeing innovation, especially [W.R. Hambrecht & Co.'s] OpenIPOs, which are really cutting-edge ... but what makes IPOs fun is that they're undervalued [by the investment bankers] on opening day on purpose to create a pop. ... Without that, it kind of ruins the whole fun of the deal. But it's not just about fun, it's about raising capital, correct? And at least a Dutch auction is a more accurate way of accurately valuing a deal -- or is it? The theory makes perfect sense, but again what makes IPOs fun is they're all about inefficiency. And the traditional bankers don't want to make them more efficient and lose their 7 percent fees? Right ... and someone like Wit Capital, which offers IPOs directly to retail online investors, is the wild card right now. ... But cannibalization is a fact of life on the Internet, and the investment banks might as well go with it. Even someone like Merrill Lynch (NYSE: MER), which has resisted the Internet? Especially Merrill, although it might be too late for them. ... You've got to understand, the individual investor is a great investor. The funds have to issue quarterly reports, so they get allocated these IPOs and they're the flippers. But the individual investors want to own these stocks; they're the ones interested in them. So does that mean that once we crack open that 7 percent fee threshold, it will be a free-for-all and the investment banks will lose? I think the top-tier firms can hold onto their 7 percent, because the world certainly hasn't ended by giving Wit Capital these IPOs. But why should any company stick with Morgan Stanley Dean Witter (NYSE: MWD) or Goldman Sachs (NYSE: GS) when they can float their issues through Wit or ETrade or DLJdirect and not have to pay as high as a fee? There's a disconnect. When you go with Morgan, you get everything. You'll have market makers making sure your stock trades more than 300 shares a day, and you get full coverage by research after the quiet period. But for sure you'll see a convergence between e-underwriters and traditional bankers, with the Wit Capitals getting bigger chunks of second-tier deals. And what will that convergence look like? It will look a lot like the deal between Goldman and Wit Capital, which is a great deal for Goldman because it's nonexclusive and they don't have to give away the farm. From a broader perspective, what's the one thing most people don't understand about the IPO market -- assuming there's any understanding it at all? I get the impression people have no clue what an IPO is. It's a stock just like any other stock, but people think it's something that just goes up automatically. Well, looking at the Internet IPOs up until now, you can understand the confusion. True, but it might be good for people to see IPOs which go down, that don't always work out. And if you had one piece of advice for those individual investors you think so highly of, what would it be? Let's say you have a company that you have to own. I'd say the first day of trading is the worst day to own it. Wait a week. Unless you can get it at the offer price, but then again, you still have to pay attention to the market. But as a general rule, most IPOs tend to fizzle out over time. If that's true, what can you say to that poor sucker holding onto a loser IPO? Patience is a virtue.