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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Dave O. who wrote (2446)	8/5/1999 10:56:00 PM
From: N2GROWTH	Read Replies (1) \| Respond to of 18137

GSCO Shorting An IPO It is very common for the underwriter of an IPO to short the stock into strong demand. They do this to create a short position that they will cover by executing the Green Shoe. If the IPO was for 5 mm shares the underwriter will typically have the right to buy an additional %10 of newly issued shares called a "Green Shoe." If they priced the deal at say $21, and the stock opens at $50, they can short 500,000 shares in the $50 area and then notify the issuer they intend to exercise the shoe. They then would buy 500,000 shares at the $21 offering price and deliver those shares to cover the short at $50. This would net the underwriter a profit of $29 on 500,000 shares, or $14.5 mm! In addition to the traditional underwriting fees ofcourse. FYI n2growth