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E*Trade Loses Red Hat IPO Arbitration Claim
mrsam writes: "I was one of the many people who, about a year ago, was picked for Red Hat's
directed share program in their IPO.
Soon thereafter the underwriter, E*Trade,
kicked me out of the program without giving a good reason.
Believing my dismissal to be completely unjustified and without merit,
I filed a claim against E*Trade pursuant to NASD arbitration rules.
For all practical matters, I sued them. A NASD arbitration claim is basically
an expedited lawsuit.
I am pleased to report that I have won my claim. I won damages AND
legal fees. I have put up the arbitration panel's decision, plus some juicy
stuff that my legal eagles have obtained during the discovery process, at
http://www.geocities.com/~mrsam/etrouble/hearing.html. The whole story, from start to finish,
is at
http://www.geocities.com/~mrsam/etrouble/."
Simple, he's smart. You don't get to be rich by paying for something when a free, suitable alternative exists :)
Finkployd
They saw that this was going to be a wildly successful IPO, and wanted to eat as much of the profit as possible, so they came up with a reasonably plausable explanation and a questionaire to go with it. They used the answers on the questionaire as an excuse to exclude a large number of invited IPO participants and keep the shares for themselves. When Red-Hat mushroomed, the sold the the shares themselves and kept the profits.
The nasty thing is: Had the IPO plummeted, they would have probably told Red-Hat that they hadn't been able to distribute all of the shares, and found a way to quietly return them to RedHat.
I dunno about you, but this thing has "Class action" written all over it in my eyes.
`ø,,ø`ø,,ø!
Free Software: Like love, it grows best when given away.
It was a good trade. Fuck a few hundred people, make tens of millions, and be forced to pay back a few thousand here and there to the annoying gnats which actually stand up to their chicanery.
Welcome to the modus operandi of corporate America.
Would an attorney charge you $10,000 to give you a CHANCE at winning back $14,000
________
That's false, in this particular context. The stock market is not a coin flip, it is based on the productivity of industry. On average it very much goes up. If your investments on average do not go up, you are doing something wrong and should either learn more or turn your money over to a manager who knows more about how to do it. I'm not talking about getting rich, I'm talking about 10 or 15 percent a year gains.
I honestly cannot understand this type of thinking. You have a free (block the banner ads if it bothers you) service that provides some news and discussion, why can you not just take from this site what you like and ignore the rest.
Why does everyone feel slashdot must conform to their own personal view of what is "geek news"?! Quit being so damn selfish everyone! Just cause you aren't interested in it doesn't mean everyone feels the same way.
Finkployd
Why do you think he manages to get 125K / year and has 60K in cash ? He just does not spend it on futile things such as webhosting. If you can get it for free, why pay for it ?
Incidently, the richest people on this planet are the ones that save a penny here and there.
You dont (usually) make money by spending irresponsibly (sp?).
Marriage is considered capital punishment for the theft of a goat in some third world countries...
Please be advised that this story is all about the Red Hat IPO. Red Hat, is a company that produces a distribution of Linux. Linux is a computer operating system, based heavily on Unix. For more information, you might want to check some website on the Linux operating system.
This is news for nerds, stuff that matters.
There were several stories on Slashdot in the months before the RedHat IPO happened because many active Slashdot users were affected by it. There were several more during the week or two before the IPO due to price changes and E*Trade eligibility issues. There were many more after the IPO actually happened. The RedHat IPO was one of the most widely covered single events on Slashdot during that time. Oh, and did you know that RedHat is a company that makes a distribution of the operating system that this site tends to revolve around?
Gee . . . and you're searching for relevance.
You obviously were not clued into the whole RedHat IPO frenzy on Slashdot. That's okay, but you might not want to spend a significant portion of your time pointing out your own ignorance to the entire Slashdot community.
Unless you're a huge investor, the biggest winners in the stock market are the brokers. They win when it goes up; they win when it goes down.
Take a look at the book ``Where Are The Customer's Yachts?, Or, A Good Hard Look At Wall Street''. Or don't. It might make you angry if you think your brokers are on your side.
--
CUR ALLOC 20195.....5804M
Dave Barry wrote about this too, but I got a letter from a firm stating I was in a class action suit against a bank for the improperly handling of a mortgage escrow account. Upon winning, the law firm received $200,000 for their gallent efforts as public defenders, and we the plaintiffs get $25 off our next loan origination fee. The system really works!
try { do() || do_not(); } catch (JediException err) { yoda(err); }
Believe it or not but geocities is slashdotted. The error message that it gives is that there is no page at this address.
Just keep reloading. It took me about 3 reloads to see the page.
"Do you think we could wipe out world hunger forever if scientists figured out how to make AOL's Free CD's edible?"-
And you know what? I don't think that's such a bad idea. If we can prevent some little old lady from dumping her life savings into options, why wouldn't we? Risk tolerance is a very important factor in any investment decision, and sometimes non-trained people are not the best ones to analyze their risk tolerance, or even how risky a particular trade might be.
I'm not saying that the RedHat IPO wasn't a sure thing (I think it was, actually), but I've seen general negativity here about know-your-customer rules, and I figured I'd voice my opinion on that.
- In Capitalist America, law violates YOU!
Er, they were singled out. The "Friends and Family" participants in the directed shares program didn't answer that questionnaire, and neither did anyone else -- other than the "open source" people. Did you read the guy's page? When asked to cite the regulations they were complying with, they could not.
________________________________________
Napster-to-go says "Fill and refill your compatible MP3 player", which is a lie. It's not MP3. It's WMA with DRM.
Because many of the people who lost out on the trade are regular Slashdot readers. Can you think of a better way of notifying them that there might be something they can do about their loss?
It is relevant because a lot of /. readers were exclueded from the IPO just like mrsam was; and the statute of limitations has not run out, so there's still time to file your own claim.
Amen. I pay for metered bandwidth for a couple of sites. I recently wrote a Windows installer that sets up Apache/PHP/MySQL. I'm SO glad I put it up on sourceforge instead of on the hosting I'm paying for. In the past 60 days or so, the 9MB package has been downloaded almost 30,000 times. I'm glad I only have to imagine the bandwidth bill for that and that was without the /. effect.
P.S. in case anyone's curious, the installer is called PHPTriad.
LetterJ
The Glass is Too Big: My Take on Things
Letter from E-Trade attached:
Dear Sir,
We regret the unfortunate situation regarding your claim involving the RedHat IPO. Although we recognize the NASDAQ ruling, we are unable to issue a cashiers check at this time.
If you log on to http://www.etrade.com/ we have established an account in your name to expedite your future investment of these funds.
Best of luck and happy daytrading.
Not knowing much about E*Trade's operations, I might just be blowing smoke out my ass. But if I were to suspect a company of a stock scam of some sort here, here's what I would think was going on behind the scenes:
1. offers the IPO publicly, to test the waters.
2. sees who is interested in the IPO. If it's enough people, then...
3. rejects all but a select few to buy stock in the new IPO, and picks up a huge chunk of it for themselves.
4. Meanwhile, they hang onto the money of those people who wanted to opt in on the IPO in order to pocket the interest.
In other words, they hold the carrot out in front of everybody, and if enough people want to nibble, they pull it back and act on it themselves. Basically, they use it to gauge the popularity of the IPO, and if it looks like it'll take off, they shut people out and keep more of it for themselves.
The Internet can be used for polls. Why not turn a stock offering into a poll to see if a stock will take off, and then use that as a sort of 'outsider information'? Okay, I mean beside the fact that it's contractually illegal and ethically reprehensible?
I'm not saying that's what E*Trade did (though reading on in the article in another window, it looks like a good guess). Suffice it to say, that E*Trade did some jiggery-pokery with the stock, the IPO's inital cost, and other peoples' money.
But whatever happened, E*Trade tried it.
And they got caught.
That works for me.
With any luck, the finding against them will keep them from doing it again. But maybe not.
---
You cannot truly appreciate Dilbert until you read it in the original Klingon.
Civil dicovery process is an awe-inspiring process. You get everything. But under the rules, are you allowed to publish what you find, or only that small portion that was admitted into evidence? What does your lawyer say?
Every once in a while, something like this happens.
But look at the cost... something like $10,000 in legal fees were awarded, and the total claim is just over $15,000 (including interest).
I take this to mean that the person who won the claim had to take the chance that he might lose, and be out $10,000... plus maybe legal fees for the OTHER side!
It's not your classic David and Goliath story, but it's nice to see an individual win out over a corporation. It looks like the system works in this case.
--
"May I have ten thousand marbles, please?"
I'm curious, who's in the wrong here? Etrade or RedHat? Was it entirely Etrade's fault that they didn't want they people to get money, or did RedHat convince them otherwise for some reason?
- I don't care if they globalize against free speech. All my best free thoughts are done in my head.
Andrew Tobias defined IPO as "It's Probably Overpriced".
I feel like picking a fight with everyone who thinks they are right. - Rainmakers
Not exactly.
Thoese are rights *the people guarantee themselves*.
They seperated out the 600,000 shares (Note: that's NOT the same as the 800,000 shares that Red Hat had indicated on their filing and promised to the world...) that E-Trade claims were sold to through the directed shares program. They seperated them into two piles- one for the open source crowd (That comprised 200,000 shares...) and one for "Friends and Family" (That comprised 400,000 shares...). According to the findings in the arbitration, they only submitted the Open Source people to the scrutiny that we all have come to loathe and hate.
Seems to me that E-Trade DID discriminate.
Oh, and there's nothing that the FCC has to do with the trading of securities or comodities. That would be the SEC. And there's NO SEC regulations other than the "Know your Customer" requirements. Had they followed SEC regs, there'd been quite a few less disgruntled people.
I am not merely a "consumer" or a "taxpayer". I am a Citizen of the State of Texas
1) Because they can
2) Because Red Hat *TOLD* them to.
BTW.. the prospectus says they may sell 'up to 800,000 shares', not 'must sell 800,000 shares'. This was at their discretion as an underwriter.
You could do that, yes. You'd be an idiot for refusing income like that, but i'm sure after awhile your paper would be out of buinsess. While i don't have a say in YOUR paper, i could start my own and say my opinion, and if its about how your paper sucks b/c you have no objectivity, well i guess you'd have to live with that. You can't make me stop.
--
314-15-9265
OK, here's a totally lame explanation from someone who knows diddly about investing, despite owning a small fortune in stocks (ah, the pleasures of inheritance in a country that doesn't have estate taxes!).
IPO = "Initial Public Offering".
When a company decides to go public, it files notices with the proper authorities, and makes it known that on such-and-so a date the public will be able to buy stocks in the company. The initial batch of stocks made available is called the initial public offering.
Lee Kai Wen
I am curious as to why they placed "open-source" participants into a smaller pool, and scrutinized them specifically. I did not participate, so I didn't see the questionnaire. I wish you could post a copy of it, or at least that subjective question.
Why would E*Trade want to profile open-sourcers? Did RedHat know about this? Where's the 200,000 shares? If they were sold, who made the money?
Their SEC Central Index Key is 0001015780 -- perhaps something enlightening can be dug up in the Edgar database, but I doubt it.
________________________________________
Napster-to-go says "Fill and refill your compatible MP3 player", which is a lie. It's not MP3. It's WMA with DRM.
There's a definition of IPO (and an introduction to Red Hat and Linux) in the background information on the site linked from the main story. It's an interesting read...
++ Say to Elrond "Hello.".
Elrond says "No.". Elrond gives you some lunch.
Any stock trader worth his/her salt knows that if he/she reads AND understands the rules of trading established by the stock market, knows that IF a site like e*trade pulls a fast one, that they can file a complaint agianst them and have it investigated.
Also to note that one of the reasons that e*trade had given for the stunt that they pulled was that "we wanted to keep our clients from making bad investments"
Bull.
IF someone wants to put $50K down on XYZ company and the next day it plunges, fine let'em. e*trade had no reason whatsoever to do this in any way shape or form to screen the investors for this IPO reservation in the manner in which they did. There are credit check regs in place, but this was BS and pure idiocy.
BTW, whatever happened to those 200K shares that went missing off of that IPO? e*trade said that there were 600K. RH's IPO reserve said 800K.
oops... big mistake.
First rule of holes; When in one, stop digging.
You sure are smug for being incorrect.
Affirmative Action applies to *government* jobs and contracts. There are no hiring quotas imposed on private business unless the private business has a government contract. The only thing private businesses have to comply with are anti-discrimination laws. The federal government has never had the power to mandate specific hiring quotas to private businesses.
--GnrcMan--
But they did have to give back some of it. My estimate in what they ended up having to give back (and this was just the Affinity group), was in the millions of dollars. This originally would have gone to mutual funds and their own traders and allies.
To give you an example, I eventually got 100 shares, which turned into capital gains of $17,000. I then bought and sold it a few more times. I still have 250 shares (equal to 125 original) and probably made $25,000 all told on Red Hat stock. So, after all was said and done, I still own more than I would have owned, but also got a nice bonus.
As someone said, this is totally unfair. I agree.
All I did was put up $51,000 in an account - most of which I earned interest on and traded with. But IPOs are highly risky - right now one of the ones I got is worth $1 from an IPO cost of $13 for example. Most of mine have done very well (UPS, Coach, etc), but it's not a good idea to put most of your money in this area. And options are even more insane.
--- Will in Seattle - What are you doing to fight the War?
I should really stop feeding the trolls. Afirmative action is a case of what my 9th grade civics teacher called the marble cake theory of government. The government does not say "You there, private business, I am going to regulate your hiring practices, right down to the percentages". They can and have made antidiscrimination laws, but afirmitive action is not covered by criminal or civil laws, it is economics. The government has lots of money. They often choose to invest some of that money in private enterprize. They also choose to buy things from private enterprize. The basic tenant of afirmative action is: "Follow these rules or we will not give you money. We will not give you grants (Bam! All the universities fall into line.), we will not buy your products (Slam! There goes all the major manufactering companies.), and we not use your services (Wham! there goes everybody else.)". Most businesses, realizing that even if they do not work for the government today they may want to do so in the future, fell into line. Hence the government imposes a "law" that is not really a law. That is also how they get the states to impose laws. Legal drinking age is a state mandanted affair. Here in Louisiana it was 18 until about 4 years ago (long after the rest of the country changed), because the state finally realized that it really needed those federal highway dollars that were being witheld for our lack of compliance with federal standards. Congress never made a law that said "You have to be 21 to drink in this country" they made one that said "States should madate a 21 year old drinking age or forfiet x% of their federal highway funds." My civics book called it the marble cake theory because it basically allows the feds to make rules without making laws (they premete the whole cake, as opposed to the layer cake model which has the feds at the top, and the states (and business) as a lower but distict layer). Hence Constitutional law (which theoretically only governs gov't) seeps into the everyday life of a business through the marvel of economics. Wow, I can't believe i actually remember some of this stuff.
I don't need a million points of light, just two points of multi-mode fiber and a 10 Gig-E router.
I was one of the etrade screw-ees, but have no idea how this law stuff works =P. Sounds like they're saying the requirement of passing the questionaire was illegal. Would that mean everyone who received the mailing from redhat had the right to invest? Would it make sense to attempt a class action lawsuit?
I will vouch for mrsam (Sam), one well respected in the net-abuse community. Heck, I'm surprized he applied anti-spam techniques to E*Trade via the legal process. Way to go Sam!
--
WolfSkunks for a better Linux Kernel
$Stalag99{"URL"}="http://stalag99.keenspace.com";
--
# Canmephians for a better Linux Kernel
$Stalag99{"URL"}="http://stalag99.net";
How many times does this have to be repeated? The Bill of Rights only restricts the actions of the Federal government, and to a lesser degree, the actions of State and Local governments. Period. The Bill of Rights does not restrict private or corporate citizens.
What E*Trade did violated NASD guidelines, which they have to agree to abide by or face additional SEC regulations ... so it was right for them to get slapped ... but even so they didn't violate Federal law. It's not against Federal law to be sleazy and slimy...
Are you moderating this down because you disagree with it,
We call it art because we have names for the things we understand.
With any luck, the finding against them will keep them from doing it again. But maybe not.
E*Trade made out very well on this scam.
They lost one arbitration. Maybe, now that this has been published on slashdot, others will step forward and they'll lose more. I certainly hope so.
However, unlike many small investors they likely rolled out of the RHAT stock fairly quickly, locking in some huge profits and eliminating their risk.
At $26k / arbitration they would have to lose a huge number of arbitrations before they would be in the red on the deal, and while that might happen if everyone filed grievances against them, that is unlikely.
It was a good trade. Fuck a few hundred people, make tens of millions, and be forced to pay back a few thousand here and there to the annoying gnats which actually stand up to their chicanery.
Until somebody goes to jail for this, there will not be any true justice, and certainly no incentive whatsoever to prevent E*Trade from doing the same thing all over again to somebody else.
The Future of Human Evolution: Autonomy