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Strategies & Market Trends : IPO Boycott -- Ignore unavailable to you. Want to Upgrade?

To: architect* who wrote (46)	11/28/2000 4:53:16 PM
From: KevinMark	Read Replies (3) \| Respond to of 61

For Individual Investors, IPO Is A Four-Letter Word By RIVA RICHMOND Of DOW JONES NEWSWIRES NEW YORK -- A lot of them spent a lot of time trying to get in, but - now that the best part of the new-issues market is past - many want nothing to do with new stock offers. At least that's what myriad individual investors seem to be saying about initial public offerings, if Web sites are any guide. "From this day forward, I will never trade an IPO on its first day, and encourage the retail investor to do the same," wrote Kevin Eagle, 34, a daytrader from Orlando, Fla., known online as "KevinMark," in a message that Friday launched the "IPO Boycott" thread on stock-talk Web site Silicon Investor. The board made the site's hot subjects list Monday, following a busy weekend of posting. "There's plenty of $$$$ to be made on trading the current trash in the market. Don't indulge (the Wall Street firms) by buying their overpriced toilet paper." The vitriol reflects the fact that the once-hot IPO market has iced over. Few of the meager number of recent offerings have risen substantially in the aftermarket. Half of the 20 most recent offerings have actually declined, according to IPOhome.com, a Web site run by Renaissance Capital. Most companies planning IPOs have simply decided to throw in the towel and wait for a better market environment next year. The anger on "IPO Boycott," together with the similarly aggrieved tone on Silicon Investor's "Analysts Exposed" board, shows the chasm between Main Street and Wall Street has widened with the rise of the bear market. "My goal is to give people an education about what brokerage firms' intentions are for the retail investor," said Eagle in an interview, and thus spare them some hard lessons. He argues the firms set premium prices for new offerings and sell them by any means necessary: "They're not out to satisfy the retail investor. They're out to satisfy themselves...As long as they can ship the inventory out the door, they could care less if it falls on its face the next day." Wall Street Suffers, Too In fact, investment banks are being hurt by the anemic IPO aftermarket, because postponed and canceled deals cut into their commission revenue. Perhaps foreshadowing a slimmer fourth quarter for the securities industry, Morgan Stanley Dean Witter analyst Henry McVey Monday cut his earnings estimate for Merrill Lynch & Co. (MER), citing the slowdown in underwriting and mergers and acquisitions. The investment banks also have a keen interest in seeing new issues rise once they begin trading. To please their institutional clients, and to ensure a "successful" offering, the firms tend to price IPOs at a discount. About 80% of IPO shares are sold to institutions, so they are the main beneficiaries of the initial price cut. Individual investors are largely limited to the risky game of riding the aftermarket wave. *At the height of IPO and technology-stock mania, that was a pretty profitable game for many small investors. But, it turns out, it was one not without risk for the entire market.* "Retail demand for IPOs in some ways created the current situation," said Brad Sinrod, president of IPO.com Inc., which provides basic information on IPOs via its Web site and on about 160 other sites. Individual investors helped push new-issue prices to "irresponsible" heights, and now their panic has worsened the decline. While the market was booming, of course, the institutions that bought the initial shares were happy to profit in the aftermarket by selling to overly enthusiastic individual investors, Sinrod said. Now that the technology stock downturn has left a slew of individual investors holding the bag, their bitterness is easy to understand. Their choicest words are reserved for the Wall Street firms, which will post large earnings gains from underwriting this year and similarly reward their deal makers, despite the market's southerly turn. "It's just inconceivable that the American people are seeing their 401-k's get crushed in lieu of the brokerage firms paying out fat bonus checks THIS YEAR due to underwriting the same filth that the American people are taking the fall on," wrote Eagle on the "IPO Boycott" board. "Clearly, it's a case of institutions taking advantage of individual investors," he added in an interview. When the IPO game starts to heat up again, Eagle plans to dissect each "trash" offering on the "IPO Boycott" board as a service to individual investors contemplating participation. It may be difficult to keep his comrades from venturing back into what can be a profitable game, even if they are out of their league. "The trouble is that there are still too many individuals chasing the big hit," wrote a poster called "Techplayer." "As soon as there is any sort of established bottom or rally, the IPO's will be rushed out the door. The hype will drive the individual to part with whatever money he has left." -By Riva Richmond, Dow Jones Newswires; 201-938-5670; riva.richmond@dowjones.com --------------------------------------------------------------------------------