Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : E*TRADE IPO Alert - Y2K and Beyond (EGRP) -- Ignore unavailable to you. Want to Upgrade?

To: noneed who wrote (9151)	11/5/2000 2:54:14 PM
From: noneed	Respond to of 10270

here is a better write-up of the point i am trying to make: ipoguys.com IPO Allocation, Allocation, Allocation Many individual investors want to know about how to increase their chances of receiving shares in an IPO. Let's take a look at some of the basics of the underwriting and allocating process so that we may improve your chances of obtaining that elusive IPO allocation. (For the beginning investor, "allocation" means receiving shares in an IPO.) Who controls the allocation? There is a delicate negotiation that takes place between the Lead Underwriter and issuing company who are the two primary players involved in determining the allocation terms and conditions. The issuing company can influence the deal in a variety of ways depending upon the agreement they have reached with the underwriter. However, in the end it is the Lead Underwriter who really holds the power, -- from determining the number of shares being offered, to setting the price for those shares. The main point to understand here is that there is a difference between underwriting and allocating. Underwriting is the business of buying shares from the issuing company. Allocating is the process of distributing shares. The Lead underwriter invites other underwriters into the deal to reduce the risk of the Lead Underwriter. The group of other underwriters that help reduce the overall risk of the Lead underwriter is called the syndicate. Generally, if a syndicate member underwrites a portion of the deal, then they are allocated shares to re-sell or distribute to their own clients, although they are not guaranteed shares. Sometimes syndicate members are not allocated any shares, even when they help underwrite the deal. The Lead Underwriter controls the total allocation process and decides how many shares members of the syndicate will receive or be allocated. When allocating shares, traditionally the Lead Underwriter creates an institutional pot or "group account" where 80% of the shares will actually be allocated. Typically this pot consists of institutional clients of the Lead Underwriter and institutional clients of the syndicate members. The Lead Underwriter controls and allocates all the shares in the institutional pot and will tend to favor allocation to clients they have existing relationships with (i.e. larger mutual funds that buy shares on a consistent basis). The remaining 20% of the allocation is what ends up in the hands of the rest of the syndicate members. The syndicate members then sell these shares to their clients, which may or may not include individual investors. The higher up in the syndicate generally the more shares are allocated. That is why your best chances of being allocated shares in an initial public offering are when your online investment bank is participating as the Co-Manager or Lead Underwriter. If your online investment bank is only a syndicate member, your chances of being allocated shares in an IPO are much smaller, depending on the number of investors vying for the remaining shares. Another group outside of the syndicate called the "selling group" participates in the deal as well, but does not act as an underwriter. This group can be other dealers that are re-selling the shares to individual investors. The one main difference between the selling group and the syndicate is that the selling group is not part of the underwriting. The selling group is not taking any risk in the offering. The selling group is only helping sell or distribute the shares. The selling group generally has small allocation numbers as well. Unfortunately individual investors are still vying for a very, very small piece of the total allocation. The IPOguys firmly believe that this will change and that allocations to individuals will reach 50% institution and 50% individuals in the next 3 to 5 years. Fueling this change will be the online banks offering IPOs to individual investors, many of which have just formed over the past year or two, and many that we believe are yet to be formed. Also, the growth in online individual investing accounts, combined with increased IPO awareness, should result in a greater demand for IPOs into the foreseeable future. Even though the odds might seem stacked against individual investors, many IPO investors we have surveyed have been quite successful at obtaining IPOs at the offering price. As with anything else, an IPO investor's success relies heavily on their personal efforts and due diligence. Money doesn't just fall into your lap in this IPO game. Like anything else, a little old-fashioned "elbow grease" goes a long way. The results of our IPOguys surveys showed that perseverance, patience, and diligence are three of the top characteristics that separated successful individual IPO investors from the non-successful ones. If the individual investor learns anything, let him or her understand that individual investors have unprecedented access to IPOs at the offering price. True, individual investors will probably not be able to participate in many of the hot IPOs that come to market. Our experience proves that it is possible to obtain shares in the hottest IPOs if investors "stay in there and fight the fight." We continually support the online investment banks as they continue to gain access to the coveted IPO for individual investors. You can bet that the IPOguys will be out there, "freakin hitting it" and keeping you informed of the newest developments in the IPO arena.