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Non-Tech : Wit Capital - The way of the future? -- Ignore unavailable to you. Want to Upgrade?

To: ChopChop99 who wrote (5849)	6/29/1999 8:40:00 PM
From: Shadowed	Read Replies (1) \| Respond to of 16809

Interesting article. Just goes to show you it's Underwriter, Underwriter, Underwriter! Look behind the pop and the flop By John E. Fitzgibbon Jr. Redherring.com June 30, 1999 Two high-profile IPOs were offered to investors for Tuesday's trading, although the outcome for each was vastly different. E-Loan (Nasdaq: EELN) was a big-time winner, while Digital Island (Nasdaq: ISLD) opened with a loss to the original investors. The difference? Look at the underwriters. Goldman Sachs (NYSE: GS) underwrote 3.5 million shares of E-Loan at $14 a share, up from a recent price range of $9 to $11 a share. E-Loan, located in Dublin, California, is an online mortgage broker providing services from more than 70 lenders. The IPO jumped to a $20 a share opening, then ran to a day's high of $40 before closing at $37, up 164.29 percent. The other high-profile new issue was the Bear Stearns (NYSE: BSC) 6.0 million share offering of Digital Island. Based in San Francisco, Digital Island provides hosting, content, and network management services to Internet service providers in 17 countries. The underwriting was cut from 7.5 million shares and priced at $10 each. The IPO opened at $9.16 a share, a broken deal. Since the business models of both E-Loan and Digital Island were well known before either deal came public, and there have been no underlying changes in the securities markets, one has to look no further than last's week IPO market to understand the price performance of each. BROKE AND BROKER Goldman Sachs, E-Loan's successful underwriter, has had the wind at its back over the past few weeks. One of last week's moonshots, Juniper Networks (Nasdaq: JNPR), came off the bat of Goldman. Priced on Friday at $34 a share, it opened at $105 before closing at $98.88, up 190.8 percent. The best aftermarket performance turned in by any IPO for the week of June 14 was another Goldman Sachs offering, the Boston-based Viant (Nasdaq: VIAN). That deal was priced at $16 and closed its first trading at $24, where it also ended the week, up 50 percent. On the other hand, Bear Stearns' last underwriting prior to Digital Island came on Friday last week. It was a 6.0 million share offering of U.S. Search (Nasdaq: SRCH), and the deal tanked. The IPO dropped 22.9 percent after being priced at $9 a share. The IPO started trading at $8, down a point, and closed at $6.94 a share. A source close to Bear Stearns said he heard that a lot of cancellation orders for Digital Island's IPO came in at the last minute. The person speculated that after the U.S. Search collapse, investors either cut back on their indications of interest or just canceled their orders outright. On Wall Street, a broker is often only as good as his last trade. The price action of Goldman Sachs' E-Loan IPO, up more than 100 percent, as compared with Bear Stearns' Digital Island flop, underscores the truth of this saying.

To: ChopChop99 who wrote (5849)	6/29/1999 8:41:00 PM
From: Elroy	Read Replies (2) \| Respond to of 16809

1. You cannot buy an IPO on margin. I've heard this many times, but I bought 400 shares of TWE in my Waterhouse account entirely on margin. In other words, I didn't have any money in my cash account, but hadn't even come close to using my full margin limit, so Waterhouse put the TWE IPO shares in my cash account and decreased my BUYING POWER accordingly. Don't know if Waterhouse screwed up, or if the statement above is incorrect (perhaps it's a confusion with 'IPO shares cannot be margined'??), but.....there you are. Maybe you can't buy an IPO on margin, but I can! :-) Anyway, it seems the answer to the question is that if one doesn't wire in the money to pay for allotted IPO shares, Wit will just sell other holdings in the account to raise the necessary cash. Makes sense. Elroy