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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
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.
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
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); }
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?
Andrew Tobias defined IPO as "It's Probably Overpriced".
I feel like picking a fight with everyone who thinks they are right. - Rainmakers
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.
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.
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