>i hold a fairly large position,
I do too with an average cost of just under 20.:-(
Btw
How many times did I tell this thread I was begging for IPO shares?
And yes I was as greedy as one could get. I come from the old school...If you don't beg you don't get.;-)
>NEW YORK, May 8 (Reuters) - Wall Street's hangover from the raucous initial public offering party that fizzled last year is getting worse, as regulators are investigating how the industry doled out shares of hot offerings to big clients.
Major investment banks may have taken advantage of their positions and charged fund managers extraordinarily high commissions in exchange for shares of hot offerings, regulators are charging.
But it takes two to tango, and some market insiders say large investors themselves approached the underwriters and offered to pay higher commission fees. Portfolio and hedge fund managers were desperate to get their hands on shares of newly public tech companies, which were routinely posting triple-digit gains in their debuts through the first half of last year.
It's called "buying into the calendar," said Mark Sutton, president and head of brokers at UBS PaineWebber. His company, which did not have a big IPO business, was nevertheless contacted by authorities amid the sweeping investigation, Sutton said.
PaineWebber, which was bought by Switzerland's UBS AG (NYSE:UBS) (UBSZn) last year, never jacked up its commissions or engaged in those types of allocation practices, Sutton said.
The Securities and Exchange Commission and National Association of Securities Dealers, in a second major IPO probe, are looking into whether underwriters violated fair practices guidelines. These practices are not clear-cut, and many experts believe Wall Street did nothing wrong. So this investigation may peter out, like the earlier probe.
The first IPO investigation, which alleged underwriters charged companies artificially high fees for stock offerings, was dropped earlier this year with no charges filed.
"The fees and commissions are subject to negotiation between the customer and the broker," said one securities lawyer, speaking on condition of anonymity.
"Having said that, the NASD's rules of fair practice say that the markups and commissions have to be fair and practical," the lawyer said.
"If it gets too out of hand, the SEC would argue it's not only a violation of NASD rules, but it's fraudulent. The old guideline for some markups was 5 percent ... when it was 10 percent the SEC started smelling fraud," said the lawyer.
INVESTIGATION HEATS AMID COOL IPO MARKET
The most recent investigation is picking up steam, even as IPO fees disappear from sight.
The market for IPOs dried up as the tech-heavy Nasdaq Composite Index fell 39 percent last year and private companies stayed on the sidelines, fearing their shares would perform poorly in the weak stock market environment.
Such top underwriters as Goldman Sachs Group Inc. (NYSE:GS), and Morgan Stanley (NYSE:MWD) posted declining profits in the first quarter as investment banking revenues fell.
Credit Suisse First Boston USA, the investment banking arm of Switzerland's Credit Suisse Group (CSGZn), last week said it expected to manage only a modest quarterly operating profit, as weak stock market conditions cut into its results. The company has been an early target of the probe, which also involves Goldman, Morgan Stanley and Citigroup Inc.'s (NYSE:C) Salomon Smith Barney unit.
The NASD's regulatory arm has told at least six CSFB executives that they may be charged with violations, the most significant development so far in the case. Some experts think the companies may eventually decide to settle to avoid costly and potentially damaging litigation.
"They sign a consent decree, write a check and make it go away," said the lawyer. "Sometimes on principle the firm will think they're right, but from a practical standpoint they don't want to keep fighting the same war."
In essence, the current probe is investigating long-running problems with the whole system, insiders say.
"This has been going on for eons," said Jack Regan, head of derivative products trading at Josephthal & Co. "Wall Street has greed and fear and this is part of that greed portion -- everything's hot and you've got to pay to play."
The allocation system is so entrenched that watchdogs need to overhaul the whole process to correct any abuses, experts say.
"If you are going to tell the banks how to select which people get shares and which people don't, that runs counter to the entire process," said Randall Roth, an analyst with Renaissance Capital's IPO Plus Aftermarket Fund.
"The only way to avoid that is to make it an objective process -- some form of an auction or a lottery," he said.
Some don't think the companies have done anything wrong.
"No one forced them (the investors) to buy and it became a greed scenario," said Alan Lowenstein, an assistant portfolio manager for the John Hancock Technology Fund and an active IPO investor.
"It's a very different process to allocate IPOs when the market is strong because everybody wants them," Lowenstein said. "Therefore you (the bankers) have to look at who gives you the best business and buys those stocks normally." |
