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Barred from Red Hat IPO?
Anonymous Crow writes "I was wondering how many other people out there are in the same situation: I was lucky enough to get "invited" to participate in the Red Hat IPO, but after I opened an account and moved my money I was told that I'm ineligible for the IPO... because I have no stock-trading experience. I opened an E-TRADE account for this purpose, and moved $1400 there to buy Red Hat stock. When I attempted to place my "indication of interest" (which is how you get into an IPO on E-TRADE) I had to answer a bunch of questions stating I'm not an employee of a stock-trading firm, not an employee of Red Hat, etc. And, by the way, how much stock I own and how ofter I play the stock market. After answering these questions the E-TRADE oracle apologized nicely and informed me of my ineligibility. Now, those of you that do this often are probably chuckling at my naivete, but honestly:
I'm a linux geek, not a stock trader. Isn't it ridiculous to "invite" a bunch of linux geeks to buy Red Hat if only experienced traders are eligible? And shouldn't Red Hat have known better?
" (I've had at least a dozen people contact me with exactly this
problem)
I guess all the stink has made some minds change.
Dear Red Hat Community Member,
Thank you for your interest in participating in Red Hat's initial public
offering. We are aware that you have recently not passed the online
eligibility profile. Understandably, you are probably frustrated,
especially if you feel you've entered a response in error.
We are required to determine whether a customer is suitable to participate
in initial public offerings (IPOs), which are speculative in nature. Our
online eligibility profile allows us to gather important information about
your investment experience, goals and financial background, in order to
determine your suitability in purchasing IPO shares.
If you feel you've entered your responses to the eligibility profile in
error, please feel free to call us at 888-707-8680 and use the PIN 4263.
One of our specially-appointed customer service associates will be happy to
assist you in updating your profile.
Thank you, again, for your interest.
E*TRADE Securities, Inc.
"Fighting the underpants gnomes since 1998!" "Bruce Schneier knows the state of schroedinger's cat"
"I lump day-traders with active-traders who have a high year-to-year turnover ratio in their portfolios."
You can lump them together all you want, but
day traders != active traders. Day traders are
people who typically buy and sell a stock the
same day. Active traders are... ambiguously defined.
"What will you be doing when we hit a bear market"
Selling short?
"With your online account, if something bad
happens you run the risk of not being able to
touch your assets for up to 60 days."
Please define what you mean by "something bad."
"You ARE going to get rich with a fundamental buy,
hold and accumulate method."
What about when we hit this bear market that
you're predicting? I'd hate to be 'holding' and 'accumulating' at that point...
"You are a beneficiary of an incredible Bull
Market. That does not make you an expert in
stocks."
I guess we won't know how much of an expert your
broker is either until we hit a bear market, then,
right?
-WW
--
Why are there so many Unix-using Star Trek fans?
When was the last time Picard said, "Computer, bring
1) Etrade does not have any new policies here. Check out their IPO FAQ.
2) 1400.00 is not going to cut it as it is most likely that when "buy" happens it will NOT be at the original offereing price. Basically you put in an "intent" to buy and they allot shares but you pay the price of whatever the stock is at that moment.(And they allot 100 shares only then proceed to next person on list in round-robin)
3) You can not buy IPO stock from a lead underwriter..hello insider trading...they are barred from it.
Before you go on slamming Etrade you should do your research. You do realize that when all these uninformed people sell after their stock just doubled! that it will fall through the floor. (ex Juno)
Actually, most brokers DON'T know what they're doing. Just look at how many incompetent programmers you have out there. It's the same with stock brokers. Most of the people that really know how to pick stocks aren't brokers.
I've stopped using E*Trade because of these type of things. I decided to open my account with Charles Schwab and I have had no problems with getting in on the IPO. I don't believe the SEC cares as much but since I'm not a finance person I couldn't figure out. But Schwab did it for me with out a hitch nor problem.
Save Pangaea!! Stop Continental Drift!!
I recently started doing the stock thing, and tried to get in on the supposed 16-18 dollar ipo of mp3.com a couple days before it went on sale. I couldn't open an account with etrade or charles shwab in that amount of time. Both required a printer (which I don't own), and at least 3-5 days, possibly as long as 20 days the fine print said on one of them. The charles Schwab office wouldn't let me buy stock at the ipo price unless I had an account with them for a half million and was making 4 trades per month. . . I eventually got an account at dljdirect. and was able to place an order (not for mp3.com and my desire for that stock faded when it was said to open at 28) the same day with up to 15,000 credit. trades are 20. more expensive than etrade, but i don't have to have a minimum amount in the account, and didn'y have to wait at all, or own a printer. look into it if you are in a hurry to get an account.
I did just what a bunch of people did -- as soon as I heard of the IPO, sent an application and check to etrade, also transferred an account.
(Transfer won't be done in time, hence the check.)
I was told just now --
1) You can't even "express an interest" yet.
2) There will be a 2 hr period when you can express interest and fill out the elegibility info.
3) You won't know which 2 hours. There will be no announcement ahead of time. You need to be logged
in to catch it. You may not even know which day.
4) It's meant to be random. etrade handles all
their IPOs this way.
I would be annoyed at not qualifying, but I'll be
enraged if their definition of random means I
miss the 2 hr window and don't get a chance
to qualify. In that case I plan to bail
out of etrade (to datek, which has worked well for me).
I told him so. Maybe if we all call,
they'll get the message. It's one thing to loose
the lottery. It's another to be denied a chance
to buy a ticket.
Long pig.
Thank you for your interest in participating in Red Hat's initial public
offering. We are aware that you have recently not passed the online
eligibility profile. Understandably, you are probably frustrated,
especially if you feel you've entered a response in error.
We are required to determine whether a customer is suitable to participate
in initial public offerings (IPOs), which are speculative in nature. Our
online eligibility profile allows us to gather important information about
your investment experience, goals and financial background, in order to
determine your suitability in purchasing IPO shares.
If you feel you've entered your responses to the eligibility profile in
error, please feel free to call us at 888-xxx-xxxx and use the PIN xxxx.
One of our specially-appointed customer service associates will be happy to
assist you in updating your profile.
Thank you, again, for your interest.
E*TRADE Securities, Inc.
Now, they wouldn't be telling us "lie this time so we can give you the stock and shut you guys up", would they?
> 2) RedHat wants their stock to go way up, so why not invite extra people to participate who
> normally wouldn't trade stocks?
I don't get it. Invite a bunch of people who in other words aren't qualified and can't buy your stock anyway?
All they should care about is getting their money...
One of the things they try to avoid are people out to make a killing on short term gains. It's in a FAQ or something on E*trade, so they try to screen out people who will buy in on the IPO and sell hours/days/weeks/months later.
That is fine, but it would have been nice if they had made it clear what the eligibility requirements were. The only way to find out was to open an account, afaict.
Sorry about that. The rules for IPOs are strict and the fact you didn't know that means that you probably shouldn't be buying an IPO (even though you do understand the product my guess you don't understand the company).
:-)
Anyway you can always think of it as stock trader's revenge. There are probably more stock traders who have gotten frustrated with unexpected complexity of Linux than Linux users who have gotten frustrated with the unexpected complexity of stock trading
Because it could hurt RHAT in the future. While it is true that the stock price doesn't directly affect the company once the company goes public, having a strong stock can significantly lower one's cost of capital, which is VERY important to rapidly growing companies.
More like cooking the goose.
An IPO is a great opportunity for you to lose a huge wad o' cash, removing yourself and a substantial number of those you tell your story to from the market, while paying a small commission. E*Trade, and the whole investment industry, would rather have you make a series of less speculative investments adding up to much more money, and lots more commissions.
The fat cats LIKE the unwashed masses. The unwashed masses bring in lots of little piles of money.
Fear my wrath, please, fear my wrath?
Homer
We apologize for the inconvenience.
I completely sympathize with you. I also received the offer letter from Red Hat, begged, borrowed and stole $1500 to open my E*Trade account, and in completing my Indication of Interest I found I was not elegible. Since I live in the US and don't work for RHL or a securities company, I'm assuming it is because of my lack of investing experience and my meager mutual fund IRA portfolio. I feel like I've been totally shafted. Oh, and here's the real kick in the pants... I called E*Trade today to cancel my account and I was told that my funds could not be released for 11 business days after being deposited to an account. They went in yesterday, so I have to wait until Aug 11 to request that they be sent to me. So I'm out $1500 for about the next 3 weeks!! This IPO deal has been nothing but a big disappointment for me. I kinda half hope their stock goes down the crapper so I won't feel bad about not being able to participate. But knowing my luck, it will IPO at $10 and shoot to $100 by mid-day. :-(
of course they knew who were and who were not eligible. it is so amusing to watch the naivete and innocence of the free software community. all you forget that when you enter the realm of commerce, suits and bureaucracy, the only substance is "stuff that matters" - yes, you guessed it right - money and profit, that is. and the closed realm of suits, like the every dynamic system surrounded by hostile milieu, has developed the system of mechanisms for protective equilibria, which ensures sutainability. one of the main mechanisms is the means of keeping outsiders out. this has the century-long history, just remember the mediaeval institutes of meisters, the closed guilds of merchants, etc., etc.
so, people, live with it and be happy to donate them your code. dont call them thieves, by any means, they dont like this. better go buy their products.
The trick is your experience with stocks/funds/IPOs. If you can argue somehow based on past stockexchange experience that you have experience with an IPO then you will get in. They wont allow newbies to participate in an IPO offering possibly because they might be sued.
I did this. I have a funded account. When I click on the new username, I get a new window that says "No accounts are currently available". I don't know whether "accounts" means mine or that no more "expression of interest" submissions are available.
Steve
I lump day-traders with active-traders who have a high year-to-year turnover ratio in their portfolios. Mutual fund managers count in this (for me at least).
High diversification is ONE reason why fund managers perform meagerly. Another, is because they ARE active traders. The average mutual fund in America sees a 100% turnover per year. While they may not be trading high numbers per day (that would be a hedge fund), they trade too much to outperform.
We have also had 9 straight years of the greatest bull market in history. Essentially, you could have thrown your money at anything and made money. That is a reason why day-trading and online brokerage firms have prospered so well.
What will you be doing when we hit a bear market (and believe it or not, they are possible!) with your calculated risks? A broker is there to insure you do the right thing, but more importantly, he is available for you. With your online account, if something bad happens you run the risk of not being able to touch your assets for up to 60 days. That's right, 60 days.... check the small print of your agreement.
You ARE going to get rich with a fundamental buy, hold and accumulate method. It is a fact that this method, throughout the 500 years of stocks, is the BEST method towards becoming rich.
You are a beneficiary of an incredible Bull Market. That does not make you an expert in stocks.
Don't forget the investment income that ETrade gets from those accounts. Imagine this: 1000 people send $1,000 and cancel the accounts a week later. ETrade waits a week and mails them a check, which takes a week to arrive and clear. ETrade would make a nontrivial amount of money from the deal. I'd LOVE to have $1E6 in my 4% APR savings account for three weeks, and I'm sure that ETrade earns a much higher rate.
This is not true. This is not a private placement, it is a public offering of shares created expressly for that purpose and the shares are not coming from any "RedHat Private Cache". There are no limits placed by SEC on ETRADE for this as evidenced by the fact that the other underwriters of the IPO will not deny you based on your answers to the questionnaires they give, but advise you, as ETRADE is unable or unwilling to do.
I wonder if there's such an animal as an open source stock brokerage.
Somehow, I doubt that would work, but it's an interesting idea.
--
QDMerge -- data + templates = documents.
how to invest, a novice's guide
misleading, many people offered this special 'deal' are ineligible.
Really, what did you expect from a spammer?
Remember the reasons many dislike spammers is that they lie, cheat, steal, are misleading, and quite generally BAD people to deal with.
See what happens when you support a spammer? they screw you.
You did it to yourself.
This is standard. My company went public and we went throug the same thing. The company that handled it was a pain in the ass, they found a million different reasons not to grant the shares.
Just say you are an experienced investor, you know the risks, you know the company, etc etc and you'll be fine.
But I'm not above a little fraud to get in on this.
The way I figure it, if I open an new account *today*, I just *might* be able to squeeze in by the Aug 4 deadline. And you better bet that I'm checking all the "experienced" and "net worth over 50k" options this time.
It's unfortunate that you're feeling burnt by this, but I really think that it is out of Red Hat's control. E*Trade is one of the underwriters (I think that's the right term...) for this IPO, and they can sell their shares as they wish.
It's cool that Red Hat set aside shares to target people in the community, but let's face it - online investing takes a fair amount of money. If you can't get the $1k there in time (actually, you probably need about $1.5k to participate in the IPO), and if your current personal finances aren't such that you could afford to lose that money, then it might be better that you not participate.
Especially if you think that they were "dangling money in front of your face." They were doing no such thing - IPOs are not sure-fire gains. Lots of them are, some of them aren't.
I don't know your situation, of course, but who's going to feel more "burnt" - the student who scrapes together $2k from his college job and loses it all when RHAT tanks (which it might) or the college student with $5k in the bank who is screened out by E*Trade, and is unable to participate?
There *was* mention of this screening process in the offer letter that was sent out. I don't know the details of the process, so I'm not sure how much wealth/experience they're looking for. There's a thread over at www.techstocks.com on this subject... It's a bummer, but I can see both sides of the argument. I wouldn't take it out on Red Hat, though. This has a lot more to do with E*Trade than with Red Hat.
Thats absolutely ridiculous. If they send an invitation, then they shouldnt try to stop you after that.
Thats like inviting someone over to a party, and when they get there ask them "Do you go to many parties?" When the answer is no, they get shoo'd away.
What a waste.
$1400? They won't let you in? Imagine that.
Suppose you click your way over to E-Trade and start flashing a cool
$140,000? Bet they'd get you in then.
You can't afford the necessary experience. Consider a low end mutual
fund. Some sort of starter deal. Anything more and your $1400.00
doesn't register.
Cha-Ching!
As for the 'Why Did They Warn Me' question; The moment the lawyers
showed up to parcel this baby out on the exchange, they stopped caring
what you thought. They probably only offered the special IPO deal to
the supposed contributors to provide an out in the case of a lawsuit
challenging the GNU license.
The 'Board' is in control now.
Where did you think all this was going anyhow?
What do they care? as long as you have the dough and can prove it what does it hurt? Who are they trying to protect?
-Al-
I e-mailed Red Hat weeks ago about the fact that few if any Linux/OSS developers, supporters, and customers would qualify to purchse their IPO issues. They were obviously not interested in what I had to say, as I've never received a reply.
It's a simple, but unfair fact, that few if any normal income individuals will ever be allowed by brokerage companies to get in on IPOs. They reserve IPO issues for their best customers only.
The rich keep getting richer...
Well, I was barred as well -- after bitching and moaning, they gave me a second chance -- so, all you guys out there -- if you complain enough, you can get them to give you a second chance on the indication of interest
I hate to rat out a guy who did me a favor, but he also indicated that I could very easily commit fraud, and lie on the application. E*Trade wouldn't check.
I don't know about you, but I'd take this as *encouragement* to lie (commit fraud? I think they take it as an affidavit, though I'm not sure) on my application.
Well, being the honest (stupid?) person that I am, I didn't do so the second time around -- and while my answers were different and spun a little more in my favor -- I still got denied.
At the very least, this is bullshit.
At the very most, I think the SEC needs to have a chat with E*Trade about its policies.
just out of curiosity, how are they giving the people on "the list" special permission beyond anyone who can try to get in early on IPO's through e*trade or witcapital or anyone else who lets you try to do that on a fairly regular basis...obviously you are logged in to your etrade account, but how does redhat communicate to them of "hey, this guy is our special buddy, let him in"...
-Matt Jankowski
Generally, I'm against this kind of "protection," but having been an inexperienced trader for a while now, it's easy to see why they do this. I remember one day where NASDAQ was going through one of its usual tech stock run-ups, and there was one stock (I can remember which), but at one point, there was a HUGE difference between its bid and ask prices...we're talking several dollars here. This is, for the most part, rather unusual, but if I had been one of the unlucky investors that had my order executed at that high ask price, it would have immediately been worth substantially less. There are all kinds of weirdness that can happen, and if you don't know about them, you can end up screwing your self fairly easily. Fortunately, I only lost a few dollars on that one.
Red Hat and E*Trade don't have anything to do with it really. They invited you to participate, but if the SEC won't let you do so, there's nothing else they can do about it.
- |Daryll
I've seen a few comments about "I want to own some Red Hat stock" --- well, guys; bear in mind what you're being qualified for is the IPO, not the stock. Anybody who has a trading account with any broker can place a market order to buy as soon as they are trading. Sure, you won't get the IPO price -- but you will get some stock, if you really want it. And if you planned to buy cheaep at the IPO and then sell on the first big swing, that's why they don't want you to participate anyway...
-- "In order to have power, I must be taken seriously." -Mojo Jojo
Well it is actually because of the fact that somebody (NOT Redhat, but rather E*Trade or SEC) is trying to protect you from 'losing' your money in a 'risky' investment by regulating who can participate.
Hal Duston
hald@sound.net
Oh great... Something else to beat up on Red Hat for. Not only are they too commercial and ready to become the next micros~1 of Linux, they also steal candy from babies and fool poor coders into thinking they'll become millionaires. (/sarcasm off)
There are financial realities at work here, folks. Not everyone will be able to participate. Red Hat certainly didn't know who would and would not have the necessary funds and experience to participate. They sent out the letter to a ton of people, which was a generous thing to do. Those who can take advantage of it will. Unfortunately, the Nasdaq is not free as in speech and it is not free as in beer, and some people will be left out. There's nothing that Red Hat can do about that.
I am not aware of any age requirement for buying a car. Anyone can contract with a minor, they do so at their own peril since contracts with minors are not enforcable. The only property restrictions that I am aware of involving age are for alcohol, tobacco, and firearms.
Same problem here...
I'm told be E*TRADE that only US residents can partitipate in an IPO. They also told me that it
is a SEC rule.
I could fax a complain to the SEC and E*TRADE but it is nearly english is not my native language and I don't want to send a piece of trash...
Could you post a copy of you fax ?
That's where the investors who have E*Trade stock hang out. Guess what it would do to their own price if all this mess was known among their own investors (worldwide Linux protest, lotsa people sicking the SEC on them, etc.) Could be fun to watch. And put those EGRP put options into your E*Trade account ;-)
E*TRADE answer:
...
One of the SEC regulations requires customers be U.S. residents to participat in IPO's. The only way to participate is if you have an address within the United States.
...
What's the URL (on www.sec.gov) of this regulation ???
I don't follow this argument.
If RedHat sells the shares for $13, they get the $13. After that, the price the shares trade for is irrelevent, surely? It may have a affect another share offer, but that must be some way down the track now, and hopefully the share price will even out after the first few days.
We've had several "Mums and Dads" floats in this country (Australia) where people were doing just this - hasn't seemed to hurt demand for the next tranche of shares...
I don't understand why so many of you feel redhat's IPO 'letters' are such a vindication of the open source movement. The only way they could truly vindicate OSS is to send a letter to -everyone- involved, not just a select few. Of course, this is probably impossible so the next best thing would have been NOT to send the letters to anyone. Already there are several OSS contributers crying 'foul' because they didn't receive 'the letter'.
And again, Redhat gets to select who receives this reward...They are free to do whatever they want with their own stocks, of course. Redhat is only rewarding those that helped THEM get where they are...they are rewarding their friends, they are not recognizing the open source community in general (I highly doubt anyone from the KDE team got a 'letter').
Furthermore, what would happen if Linus or some other prominent kernel developer were to buy stock in Redhat? Would this not be seen as an endorsement of Redhat? Indirectly then, everyone on Redhat's A-list, if they bought stock, would be endorsing a single distro. I see a great conflict of interest in this.
I realize Redhat probably doesn't have these grand, evil motives, but who is to say? Indirectly it could affect the entire linux movement in a negative way. What if Redhat decides to say that they are 'officially' endorsed by Linus (if he buys stock)? Even if they say nothing at all, the general public might think "Well hey, Linus himself is a shareholder in Redhat, therefore it must be the official Linux".
I think the greatest vindication of the Open Source movement is not a gift of IPO stocks from Redhat, but rather the fact that so many people use and contribute to the movement in general. Enlightenment is vindicated by it's users. So is KDE & Gnome. This whole IPO issue is causing more divisions and arguments than it is worth.
We could figure out the criteria, given enough data points.... Here's my data (I was rejected):
household income: $25k-75k
liquid net worth: $20k-25k
total portfolio: $10-20k
investing time....
stock: 2+ years
options: 2+ years
mutual funds: 0
IPOs: 0
US Treas: 0
Municip Bonds: 0
Corp Bonds: 0
Knowledge of investing: good
Understand market is volatile? Yes
objectives: aggressive growth, growth
not affiliated with anyone in stock market
I opened a new Etrade account with $4500.
RESULT: rejected.
I also got an invitation, and went through all the questions. I think it sucks that they can decide what I want to do with my money. The ONLY reason I got an E*trade account about a month ago (actually the only reason I decided to start trading) was because RedHat was going public. Hell, when I received the invitation, I thought I would automatically get shares. BTW: whats going to happen to the shares set aside for all us OS developers that can't get shares?
Also to follow up, after I spent the time to apply for the indication of interest, I have just received an email saying 'We understand that you failed the test, if you felt that you have entered the responses in error, please call xxx-xxxx to correct them'. I am going to try to change all my answers to "I have umpteen million dollars to invest" and "I have 20 years of experience (even though I'm 23)". You're right when you said "fuck you, E*trade". I feel like I've been segregated.
You might view this as exclusionary, but it is a big step up from the old days when none of you peon-whiners would stand a chance at getting in on this or any other IPO.
Do you know wich SEC they are referring to ?
The thing you need to remember is that it is very difficult to get into an IPO. In Initial "public" offering, "public" is almost a bad term. You have to know some of the big broker to get in on an IPO. The good news...yes prices usually soar from the IPO price to the thirty days out, but this is still a small percentage of what a good stock will be worth (thats where the risk of investing comes in). The other good news is that if you watch closely, market "corrections" and lowered interest after the IPO will often bring the prices back down to a very attractive level. Sweat not my fellow linux lovers, don't discount Red Hat stock just because you can't get in on the IPO, most people can't.
Yes. I called E*Trade and spoke with a live broker, who said I had to take the test, and I failed it. She was just reading off the test from the web site and filling it out for me, pretty much.
I'm not english speaking, can anyone tell me what an IPO means ?
And btw, how about CEO ?
That's why I didnt' cash in the money I've been carefully stowing away for the IPO.
I used to work at a brokerage. Let me tell you...there are almost ALWAYS fees associated with closing out an account. The minute I saw all the shit that E*Trade was throwing at me just for the high honor of taking my money, I knew something was wrong.
Also: WHY would one need experience trading in the case of volatile stocks **in one's field of expertise?** ((---note caveat
Seriously. Most of the old brokers I used to work with didn't know their butts from their elbows when it came to ANYTHING with an "on" switch. Yet they were being trusted with huge personal accounts to work IPO stocks and tech stocks all the time. If RH saw fit to invite "the community" to the IPO, then the community should be assumed to know enough about what they are buying.
OK, here's their sample questionairre; what items should I answer... creatively... to get in?
(I think lying is bad, but I think this stupid "protect you from yourself" attitude is worse...)
Please select the category that best approximates your annual household income.
$0 to $14,999
$15,000 to $24,999
$25,000 to $74,999
$75,000 to $124,999
$125,000 to $199,999
$200,000 or more
Please select the category that best approximates your liquid net worth.
(* what's liquid net worth?)
$0 to $19,999
$20,000 to $24,999
$25,000 to $49,999
$50,000 to $99,999
$100,000 to $199,999
$200,000 to $499,999
$500,000 to $999,999
$1,000,000 or more
What is the approximate current value of your total investment portfolio?
$0 to $9,999
$10,000 to $19,999
$20,000 to $49,999
$50,000 or more
Do you have accounts at other brokerage firms or mutual funds?
Full Commission/Service: Yes No
Discount/Traditional: Yes No
Discount/Electronic: Yes No
Mutual Fund: Yes No
How long have you been investing in any of the following? (each item answer Never, 1 yr., 1-2 yrs, 2+yrs.)
Stocks
Options
Mutual Funds
Initial Public Offerings
U.S. Treasuries
Municipal Bonds
Corporate Bonds
Given the length of your trading experience and the frequency of your trades, how would you consider the extent of your overall investment experience and knowledge?
None
Limited
Good
Excellent
Are you aware that the stock market has basically been and may continue to be volatile and that aggressive growth stocks, which may generate returns higher than the overall stock market, generally involve a higher level of investment risk?
Yes No
Which of the following describes your current financial objectives? (Please respond to each.)
Aggressive Growth? Yes No
Growth? Yes No
Income? Yes No
Capital Preservation? Yes No
As this is not really a SEC rule, it is obviously nowhere on www.sec.org.
Actually, a later call revealed that E*Trade is actually worried about *foreign* regulations preventing them from "solliciting" business from foreign nationals. I.e. for example, E*Trade is not registered in France, and they are concerned that the French might have a regulation which would prevent unregistered brokerages to offer IPOs to French residents.
However, this too is only a cover-your-ass move: most countries don't have any such regulation, it's just that E*Trade is too damn lazy to check out the various countries' legislations.
--
So you will be selling short when we hit a bear market eh?
Well that is handy... Great thinking!
By something bad, I am speaking of a correction, crash or bear market.
Using a fundamental approach to buy, hold and accumulate, is extremely beneficial during a bear market. With this philosophy, you do not look at a crash or bear market as a time to sell, get out of the market or sell short... you view it as a time to accumulate. All of these great companies are now on sale, buy more!!!
With hindsight, we know that we should have bought when the market "crashed" in October 1987, falling to 1600 on the Dow. But how many of you would still have liked to have bought in August 1987 when the Dow was extremely over-valued at 2700, and held on during the crash (or even better, accumulating more)and still own those securities today when the Dow is over 10,000.
"Reacting" to a bear market or crash can often be the worst thing you do.
--
I've been searching etrade all afernoon but no luck. Post a url!
This is something completely different than your broker/consultant profiting on the spreads. That simply is not how it works.
The fact that a broker/consultant can get you a better price is one of the advantages of having a broker... not a method for him to make larger profits than you!
Basically the idea behind an IPO is to sell the underwritten shares of stuck to fund the company for growth and immediate short term needs. If 5,000 joe schmoes buy in at 13, and sell at highest bid on opening day that would be an average of 50,000 shares sold and bought and still bouncing around on opening day. The purpose is for funding the company, and in order for this to work there has to be long term investment within redhat.
Just because you can't buy 100 shares and make a quick few thousand bucks doesn't mean E*TRADE is trying to screw you over. If you had a 50,000 dollar investment then that is something the company will benifet from. The average joe would sell immediatly if the stocks went from 13 to 50.00 but an investment firm would hold off for the long run as its cheaper for them to hold up money in investments and such and it offers a higher profit margine then savings and CD's
There is *no* such thing as a free meal, and i personally laugh at everyone of you out there bitching about not getting in on the bandwagon. Its not about YOU getting the money, its about RedHat and the underwritters getting the money. When the stocks settle, well then you can take ownership in part of redhat. but if even 5,000 people are buying 100 shares a piece and 50,000 shares of stock are floating around, its not good at all. The price would be to volital and the market would most likely drop below value or never reach its initiall estimated value and loose money on the IPO. 5,000 is a small #, i'm sure more people then that want in on the IPO bandwagon, so the numbers could be even larger.
You should be proud to own part of Redhat as a company, and not expecting to get rich from it. Hell i've written stuff for linux, i've installed many servers, and i wish i could get rich quick too. but geezus, give the market the faith its been running on for years and shut your whinny traps.
--
That would be "the right to petition the government for redress of grievances" -- and yes, it's one of those big important things on the short version of the list. Unfortunately, our elected personages view that list as a major inconvenience to their plans, and tend to infringe on it at their whim, and let the Supreme Court decide whether to slap them down for it. A pity.
(wandering offtopic)
I'm sure somebody has mentioned this:
The "Oracle" is not E*Trade (nor RedHat).
It has something to do with SEC/NASD or so
I've been told.
I think what E*Trade did screw up was in not
providing clearly definitions for the questions.
In particular such questions like:
"What do you feel your overall expertise at
trading is?" Excellent? Good? Fair? Poor?
That is highly suggestive. Compared to just
about everybody else where I work I'm a genius
at investing. But compared to Tom and Dave
Gardner, Alan Greenspan or Peter Lynch I pretty
much suck.
E*Trade should have a *very* easy to find,
must-read FAQ on exactly what the questions
mean. As in definitions for what "Good
experience" is.
And for those out I would recommend placing
your indication of interest directly through
a human broker at E*Trade. I did and he
cleared up several points such as that.
For one: "What is the amount of liquid assets
you own?" Silly me: I thought "liquid" meant
"cash" or anything that you can directly write
a check against without incurring debt. Well
I've I'ld have answered that I'ld have killed
myself. I don't keep more than a couple
thousand in such accounts (checking mostly).
But what "liquid" really means is: "Cash or
*anything* that can quickly and easily be
converted to cash." This includes any mutual
funds you may have, stock securities, checking,
savings... Basically it turns out to be my
entire portfolio minus my house, automobiles
and IRA/401Ks.
If you don't have a large amount of liquid
worth then the SEC will mark you ineligible
because you cannot afford the high risk of
IPOs. If it were to go very badly for you it
would wipe out just about everything you own
except the roof over your head.
I know it sucks, I really do. I learned these
lessons the hard way before. I encourage anybody
who went through this to write a simple letter
to E*Trade asking them to make available much
clearer documentation on the IPO process and
questions.
It is unbelievable how ignorant the above statements are.
This is absolutely not how things work.
It is not called the fill... it is called the spread.
Brokers do not make any money off the spread... PERIOD.
Everything you have said is completely false.
I just checked etrade while logged into my etrade account (7/28 3:30pm EDT) and redhat is still listed under the "Upcoming Offerings" section and NOT the "current offerings" section and I cannot find any way to indicate interest in the offering just yet (not to mention that the offering price has not been determined yet -other than giving a $10-12 range) so I am not sure what he is seeing maybe people that got "invited" have a direct link since their account name match up on a list???????
I wouldn't mind getting to pick up a couple blocks of redhat and hold on for the long haul but with my luck there is no way I'll be one of the ones lucky enough to be allocated shares at the ipo. (I still plan on tossing my name in the hat just in case)
on a side note: everyone that is all pissed off about not being invited to the ipo or as unlucky as me and won't get picked for the shares even though you've had an etrade account and plenty of experience and $$ in the market, the best thing to do is wait and see what the shares do after a couple months. who knows the people that get in on the ipo might just loose a couple dollars if the price drops to $5 and then we can come in and get some on the cheap. and if not and the price stabilizes well above the ipo price then if you're not willing to buy at the higher price then you don't believe the company will be succesful anyway and you should not be putting your investment money in their shares. Me? if I don't get ipo shares I will sit back, see what the price does (probably an initial skyrocket and then a fall to a reasonable level) and if when it calms down I believe the shares are a good deal (ie. their price is low enough that I think their target price a year from then will be better than the gains I can get from an s&p500 spider) I will buy then, otherwise off to other investments. (who knows not getting in on the ipo may be a blessing)
-med
Not true. I signed up for an IPO with E*TRADE and I got it. I am 1 for 3 now.
So, attached is what was waiting in my mailbox this morning.
Is there an attorney out there who can tell us if we have grounds for a class-action lawsuit?
Date: Wed, 28 Jul 1999 13:42:57 -0700
From: Jason Saxon
Subject: Redhat Community Member
Dear Red Hat Community Member,
Thank you for your interest in participating in Red Hat's initial public offering. We are aware that you have recently not passed the online eligibility profile. Understandably, you are probably frustrated, especially if you feel you've entered a response in error.
We are required to determine whether a customer is suitable to participate in initial public offerings (IPOs), which are speculative in nature. Our online eligibility profile allows us to gather important information about your investment experience, goals and financial background, in order to determine your suitability in purchasing IPO shares.
If you feel you've entered your responses to the eligibility profile in error, please feel free to call us at 888-707-8680 and use the PIN 4263. One of our specially-appointed customer service associates will be happy to assist you in updating your profile.
Thank you, again, for your interest.
E*TRADE Securities, Inc.
Don't forget...even if they don't charge a "fee" to close an account, they make it up with the interest they get while keeping your money away from you.
All I know is that I feel pretty screwed by the whole thing.
Beginning of this week, I created an E*TRADE Account as I was invited by RedHat to participate to the IPO.
:-((
This morning I learned that I was not eligible for this IPO because I honestly answered to the profile questions.
I want to close my account but E*TRADE says that I have to wait 11 days before having my money back.
Conclusion: I have given away $1300 for E*TRADE to make some money with it during 11 days
Now, I'm not personally happy with everything RH is doing but that falls under the realm of personal, phylosophical differences. They aren't doing anything anyone could remotely concider as "bad".
Bottom line: Shut the #&%$ up!
--
If I actually could spell I'd have spelled it right in the first place.
I worry that if too many Wall Street types buy Red Hat stock, and not enough people who are passionate about Linux, the company will become a soulless money machine. But that's just fear (it has a basis in fact though remember what happened to Netscape. <shiver>AOL</shiver>) It would also be kind of nice if some of the people who helped Linux take on Windows could make some money, but that's just a secondary concern. Well, just my opinion.
I would hate to have to leave a garrison behind.. -- Darth Vader, The Empire Strikes Back
All the creatures will die, And all the things will be broken. That's the law of samurai. (Jubai, 1605)
Can someone who isn't going to join the IPO mail me their username and password? I'm currently involved in a running war with E-trade because they completely refuse to have normal customer service (like read your email dammit), and I'd like this to be the last time I deal with them.
This is really funny... It's sooooooo true.
RateVegas.com - Vegas Reviews
Funny, that's almost exactly what I'm planning to do. Send them their miserable $1k, buy however much RHAT is available, then ship it to my preexisting securities account and close the etrade account. The last thing I want to do is deal with etrade -- especially after the trouble it's been trying to get one sodding account open with cash.
I have tried to get the form from there, but it didn't work for some reason (it was few days ago), so I called them and applied over the phone. Denied nevertheless.
Contrary to the popular belief, there indeed is no God.
Sure. Here it is.
Duh. You don't buy shares on the IPO day. Thats moronic. However if you get a chance to buy the shares at the offer price (in the case of MP3 I think it was around ~24) before they go public then its a great deal. In this case those who got in on MP3.com at the IPO price are still close to doubling their money.
_That_ is what we are talking about here for redhat.
Slashdot, would a spell-checker for posting be too much to ask? It's not rocket science!
Lots of people here are confusing the "invited" group (those who got the email from Red Hat) with the E-TRADE customer group.
The "invited" group got an URL, username, and password to a place on E-TRADE that isn't linked to from their main page. This group can place their indication of interest _now_, and only competes for shares amongst the other invitees. E-TRADE knows who the email was sent to, so don't bother trying to sneak in.
Everybody else who's an E-TRADE customer is in the other group. This group *does* get a shot at the IPO, but you have to hit E-TRADE during a two-hour magic window, and then compete for shares in a drawing with everybody else in this group.
Is this something they do for IPOs only or for all trading?
It seems like a Catch-22. If you haven't traded stock before, they won't let you in. How do you get the experience if they won't let you buy your first stock?
On my last indication of interest at E*Trade, it asked for the number of shares you want in blocks of 100. If you're goona try and get some you better make sure you have enough money to cover at least 100 shares. (And don't count on the price staying at $10-$12 range. After all the indications are taken, E*Trade has a habit of saying "The IPO price has been raied to $19 a share...")
Did the same thing this morning, and got the
form.
Steve
I got a letter.
I sent E*trade two thousand of my dollars.
I got denied by E*trade to participate.
It makes me wonder if I should have been day trading rather than working on software for the good of the community... Well not really, I know where my heart is.
This looks like old men and their old money, the haves and the have-nots. The wealthy in this country ensuring only they can participate in making more wealth, in the name of 'protecting us poor shmucks from ourselves'.
I don't remember any questions regarding how much experience we had in the industry in which Redhat operates, yet this seems to me just as important to know the difference between the GPL and the EULA as it is to know the difference between a short and a margin.
I do not blame Redhat, and I still plan to buy their stock and hold it. Just give it a few days to settle down to a little over double the offer price. I'll still make a ton of money, although it may be 10X rather than 20X. *grin*
As for E*trade, I'll be closing my account and transferring my funds back into my Datek account. Given the stringent requirements and the targeted community (open source developers, not known for their affinity to stock trading) it was downright underhanded for E*trade to require submission of funds before allowing access to the elegibility profile. I'm just glad I didn't sell any of my current positions to get in on this.
-- Greg
PS: If you've been denied access to the IPO but still itching to participate, according to the IPO elegability FAQ:
"If you have more than one account at E*TRADE, you can select another account to participate in the public offering and submit an eligibility profile for that account"
So, close your account, and re-open a new one immediately, then tell them you have a million in liquid assets, been trading options stocks mutual funds and IPO's since you were three, you make over 200,000 a year and your looking for everything from agressive growth to capital preservation. That should get you by.
Slashdot, would a spell-checker for posting be too much to ask? It's not rocket science!
Unless the stock goes down, in which case you'd have no profits to redistribute.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
Can't you people read? I said right at the top of the message you're replying to that I am NOT A DAY TRADER. I'm not an "active" trader either. I make on average maybe 5 trades a year, and most of those are my "B" stocks that I don't have a lot of money invested in. Almost all my wealth has been accumulated through investing in a few good stocks.
I'm curious as to what the "invitation" looked like, but it's really, *really* difficult to get in on *any* IPO unless:
1. You work for said company
2. You are "in bed" with someone in said company
3. You're conisdered a "qualified investor" (worth millions)
I've tried getting in on Invidia's (glad I didn't now), Priceline, and Critical Path... I gave up and didn't bother with Be's or Red Hat's.
I had a sucky sig.
You have obviously never worked for a financial company. Not only does the SEC have direct oversight, but so do the "self-regulating" bodies. Any one of thes entities can put a firm and/or a person out of business. And it's a damn good thing they exist.
The E-Trade questionare reflects SEC suggested guidelines of what they call (and this is a standard industry phrase) the "sophisticated investor". And if the public were left without these protections, there would be quite a lot MORE fleecing going on.
Noah
previously a registered NASD Series 7 & 63
I don't understand, what can I do? If anybody knows a way around this, let me know.
:-))
Lie. It should be obvious from the form what the desired answers are. (Hint: yearly income $15K and 0 years investing in stocks won't get it
--
If you really want the stock, you could always write a fancy Perl script to check ETrade every 15 minutes or something, parse the response, and then notify you when it's time.
Well of course you have to follow the money. Most brokers get paid per transaction, but there are other financial consultants whose fee is a percentage of the value of the portfolio they are managing for you. Therefore, they make more money if the value of your portfolio goes up: their incentive is tied to you making more money, which is exactly the right thing.
I'm a big fan of delegating to experts.
Here's what happened to me: Got the letter, transferred my existing brokerage account from TradingDirect to E*Trade, only to learn later on that "securities industries regulations" prevented me from participating because of my nationality. This information was not given to me prior to transfering my account despite a specific question about the subject. At E-Trade, I not only pay higher transaction fees than I did at TradingDirect, but I also get a worse service (no limit prices expressed in 1/32), for no compensation (the possibility of doing IPOs was a lure)
Puzzled, I called the SEC at 202 942 7040. There I spoke to Mr Jack Hardy, who confirmed to me that no such regulation exists. Apparently E*Trade is just limiting eligibility for their own convenience, and are cowardly hiding behind phantasy regulations.
Actually, by claiming the existence of these phony regulations, E*Trade may not only be misleading potential investors, but they may also be misrepresenting the SEC's position. Mr Hardy recommended me to fax a written complaint to 202 942 9634 (attn. Jack Hardy) and cc it to 650 331 6806 (attn. Henri Carter, Vice President of Compliance Department E*Trade Securities Inc.), which I did. So far, no change yet apart from a clearer message on their subscription page. However, I noted that the deadline has been moved to August 4th. This gives us another week, and if enough people make their voices heard, the SEC might lean on E*Trade hard enough to get us furriners our part of the cake too.
And if you know what you're doing, you'll never need to buy software, you'll just write your own. And if you know what you're doing, you'll never need to take your car into the shop, you'll just fix it yourself.
Not everybody wants to be a full-time trader. Not everybody wants to spend their time being a slave to their money, and thinking about it all day. Some people just want to hire someone who knows what they are doing, and then ignore everything but the bottom line: ``how many pizzas can I buy today?''
I had correctly told E*Trade that I earn $125K+ a year, and I have about 60K in liquid cash. They did not want my money.
I told them to close my account, and mail my check back. I was ready to invest in at least 1000 shares. They said that they'll send it back on August 10th, because they allegedly have to wait for my initial check to clear first.
That's ok, because I have plenty of more cash to invest, in the mean time.
--
The rich get richer and the poor get poorer. I thought about buying Redhat too. I'm too young and don't have the contacts. Everyone knows the stock will go way up. But of course, you already have to have a million dollars to turn it into 100 million. It's not possible for for the average joe to invest in a company they like. I say to hell with all of these overpriced technical stocks, like Yahoo, a searchable index, go figure.
People, their what's for dinner.
>Goldman doesn't open accounts for less than
...
>500,000 I think. Might be higher now.
yes, actually it's 5,000,000 USD now. So I think you can forget about getting an account at Goldman
My response to that was simply: fuck you.
I have 60K in liquid cash, and I earn a six digit salary, and I do have some trading experience.
E*Trade blew me off, so I told them to mail me my check back.
I would really want to know how many open source developers would actually qualify under E*Trade's guidelines. Not many, I bet, which would make Red Hat's offer a complete sham.
--
Wrong. I have much more than that in my bank account, and E*Trade still blew me off.
--
Yeah, I put my $50+K in too. ...
The thing that gets me about this is, on my other (full service) account (at another broker), I've got them promising to get my shares when they're offered (up to $100K), but on E*TRADE, they won't even let me get put on the list. I'm willing to pay for a phone call to get the shares
Will in Seattle
at least I get interest on the money
Will in Seattle
I called the IPO help line listed on the etrade site. 888 something. An automated response asked for my pin number. I have an etrade account with a good amount of balance, but no one gave me a pin number.
Maybe we should try the ACLU and file a class action lawsuit!
I did. I talked to them on the phone. The IPO is open to anyone who has received the invitation.
--
Exactly. They sure treat you better when you've got more than half a million in an account, based on my experience.
Which is not fair - your money should be as good as my money.
Will in Seattle
First off, it has nothing to do with e-trade,etc..
:(
1. If you are an etrade customer and etrade is a sponsor of an IPO (they are)
2. do you have at least $50-75K in a portfolio?
3. are you going to dump at least $10K for that IPO?
4. did you lie and say you had 5 yrs experience on the form..
(the minimal portfolio and investment are what they care about, the were being nice not to say $1K is a joke..
one who knows the reality of it $$
I call him, I say 'Hi Ken' and we talk about it and then he helps me out and then I get to hang up and know that he is working his ass off for me. This electronic trading stuff is for the birds. Yea, its great if you think you are macho man day trader but to really reach an investment goal and to really not get screwed its good to pay a person to help you.
People pay geeks to make their computers work for them, why are we so hesitant to pay people to help us make our money work for us?
i actually did hoping that someone would use it.
check the last slahdot comments the last time the story was put up.
Sold out to whom exactly? Would have been me if I had the funds.
Hal Duston
hald@sound.net
I looked into this etrade deal seriously, because I'd like some redhat shares too, even though I don't have the letter. Here's the deal:
Etrade has all people interested in IPO's fill out a profile. The profile asks for information, such as assets and investment experience. The reason for this is as follows: a) IPO's are very risky, it's for your safety, and b) Etrade gets introduced to new IPO's based on how well it maintains price stability. More experienced investors are more likely to heed etrade's warning about selling shares before 30 days have passed.
The solution? Just get a real broker. If you have a letter, a real stock broker will be able to get you your shares. That simple. Yeah, you'll end up paying $60 per transaction commission...but let's face it folks, redhat is going to skyrocket. If you get a few hundred shares at $10 a share, you're not going to care much about paying $120 in commission.
-Larry Lansing
zanzar@nycap.rr.com
www.fuzzynerd.com
...These aren't the droids you're looking for....Move along....
i recommend everyone checks out a software called 2nd level for trading shares. e-trade sucks for daytrading and sucks as a company.
Were you previously trading with etrade? It seems several of the people who have been approved have a history with etrade. (which looks pretty bad from a spam/fraud point of view -- etrade has received many thousands of dollars in this deal & if they base the profile on your trading experience with them, they knew before hand that they were going to bounce all these new accounts).
...d'ya think you could get some of the RedHat brass to pull some strings on this? "Open source software developer" generally does not coincide with "liquid net worth over $50,000" (which is what I heard the eligibility criterion to be). If you really want to give back to the "little guys" who have helped develop the kick-ass software that RedHat's selling, you might consider easing those criteria a bit.
I'm kinda smoked by the whole deal. I saw the IPO offer as a welcome validation of the principles and spirit of community which have motivated me to expend so much time and energy on open source projects in the first place. And now I feel quite a bit cheated by the whole affair. It would have been better not to get my hopes up in the first place, I think. I hack for love, not money; dangling money in front of my face then yanking it away is just cruel --- an attempted corruption of the soul of this movement.
Here's what happened to me:
Got the letter, transferred my existing brokerage account from TradingDirect to E*Trade, only to learn later on that "securities industries regulations" prevented me from participating because of my nationality. This information was not given to me prior to transfering my account despite a specific question about the subject. At E-Trade, I not only pay higher transaction fees than I did at TradingDirect, but I also get a worse service (no limit prices expressed in 1/32), for no compensation (the possibility of doing IPOs was a lure)
Puzzled, I called the SEC at 202 942 7040. There I spoke to Mr Jack Hardy, who confirmed to me that no such regulation exists. Apparently E*Trade is just limiting eligibility for their own convenience, and are cowardly hiding behind phantasy regulations.
Actually, by claiming the existence of these phony regulations, E*Trade may not only be misleading potential investors, but they may also be misrepresenting the SEC's position. Mr Hardy recommended me to fax a written complaint to 202 942 9634 (attn. Jack Hardy) and cc it to 650 331 6806 (attn. Henri Carter, Vice President of Compliance Department E*Trade Securities Inc.), which I did. So far, no change yet apart from a clearer message on their subscription page. However, I noted that the deadline has been moved to August 4th. This gives us another week, and if enough people make their voices heard, the SEC might lean on E*Trade hard enough to get us furriners our part of the cake too.
Well, damn, I don't mean to sound harsh, but if you had to beg, borrow, and steal to get your $1500 (which actually may not even cover it, if they re-price above $15) then why are you even considering this investment?
I think the real story here isn't RedHat and what's going on with the Open Source developers, it sure sounds like it's ETrade not letting their customers buy the stock they are plunking down good money for. That's the *WHOLE* point of ETrade isn't it to be able to buy and sell stock over net?
If there's some CGI at ETrade acting like net.mommie trying to save me from the possible loss of my piggie bank, Red Hat isn't the ones to be flamed, it's ETrade.
Maybe the bottom line is, ETrade doesn't deserve our business and time to route around it.
Surely Red Hat wasn't aware that this would be a problem when it offered the shares to the community. It sounds as though this is an automatic response by E*Trade's systems--another example of the problem of letting computers make decisions that should be made by people.
I think that the likely solution to this problem is attention; once the usual sources--News.com, Wired, Salon, and so on--pick up on this (and we know they check Slashdot regularly), E*Trade will likely right the wrong. I bet it will look strikingly similar to the Yahoo/Geocities debacle once it's over.
--
Wage Slave Journal
You're right. They shouldn't actually make any money.
I suppose you don't make any money sitting in front of a computer either?
Just sit in your parents basement all day tapping on a ratty old keyboard in your underware? Or do you work in a McDonalds or something... Or are you 12 and still don't have a clue as to how the real world works?
Or have I just responded to some really lame bait?
The SEC rules try to ensure that people taking such a high-risk speculative investment don't get ruined. Generally you need about a quarter million dollars and quite a bit of investment experience to invest in an IPO like this. I'm sure E*TRADE would love to have as much demand for reserved shares as possible, but the SEC wont let them.
Aaron
Who bought 4,000 pre-ipo shares of RHAT
Sorry you got tripped on this, but if you read the accompanying material, it was pretty clear that you're supposed to pass yourself off as a "high roller". They changed the deadline, so you might still have time to open another account, assuming that would work.
Yeah right. I am sure he's really busting his ass.
BTW ETtrade is not really for daytrading. Real daytrading requires immediate trading, not 20 minute delays or whatever.
LoRider
It isn't that bad. While it is true ETrade makes interest, they pay that to you. It probably isn't 4%, because it is compunded daily. However they are paying you the interest earned while the money is in their account. I'm sure they get a little off the top of that, and they take the whole amount while the check is in the mail, is about $.70 per person, stamps are $.32, and envlopes are not free, nor is staff time to send it
If you had read ETrade's fine print you would know that you get the interest. I was going to post the URLs and interest rate, but they are too long for a lynx line, and netscape is acting up on me. Javascript is getting in the way. Go to their web site ETrade and prove me right, it is easy, and the reasearch will do you good.
When your broker works for a firm that is a market maker, frequently the brokerage will fill your order at a price DIFFERENT than the current Bid/Ask. I sometimes get my limit buy orders filled in those cute little blips you see where the price "dips" down for a brief shining instant. Basically, since I'm a good customer, as is my family (helps if we're talking millions), they'd rather sell to me at 68 1/2 and keep my business then sell to someone else at 68 9/16 who isn't a normal customer. Since during that day they held millions of shares that they may have bought when it dipped down to 67, they still make a profit, both from their inventory (reported as corporate profit of the brokerage), and from their commission.
And yes, I've actually BEEN a market maker more than once, in a few lightly traded stocks and bonds. Kind of wierd seeing the blips and realizing that's you.
Will in Seattle
I didn't see anyone ask this question.. but out of 200 post I could have missed it. Has anyone on the list that can't get in contacted a live E-Trade customer service rep? I'm sure if you tell them who you are, what its for, and all about the shares being held for selected individuals. They should then be able to unrestrict your account to allow you the purchase of the IPO. If this doesn't work then I would contact Red Hat and find out what you have to do (that hasn't been done) in order to get the reserved shares.
just my 2 cents
"Imagination is more important than knowledge" -- Albert Einstein
Since E*Trade solicited Linux hackers and promised them in on the IPO, then they should provide the shares at IPO prices.
... than we will post anti-E*Trade propaganta
on all linux web pages
I guess they would not like it, and we had some
fun watching the etrade stock going down.
they [the market, not e-trade] don't want people jumping in on an IPO and selling off at $50 higher per share, at the end of the day.
thus, from what I've heard, they're pulling together and choosing candidates through their past trading experience.
This said, someone who gets in, and immediately sells off like I mentioned before, runs the risk of getting blacklisted.
If I remember correctly, there was a story(can't remember where I saw it) dealing with the "old guard" of the stock market being extrmemely displeased with Redhat for not following the tradition of allowing the rich to get richer by giving them the first shot at the IPO.
Perhaps this is their way of getting back at Redhat by exercising some little known rule?
If this is the case, then I wonder what, if anything, can be done about it...
Just some thoughts...
dCf
If Linux is to compete in the market place and be become a viable platform it needs more companies willing to take that step. You can't have a full time staff providing support and improvements if you don't pay them. Let's face it, I'm a Linux hobbiest, but I have a full time job to eat and pay my bills.
Check out:7 7,00.html?pfv
.02 (I tech for a Large Investing Firm) - this is very, very standard stuff. It could have been avoided, but what do you expect when the press is full of stories of people getting rich?
http://www.news.com/News/Item/Textonly/0,25,398
That was quick.
My own
Here's why Those Who Know are chuckling at the e-Trade (known amongst day traders as e-Turd) disqualification of wide-eyed hacker types trying to get in on the Red Hat IPO: for an Internet IPO (which Red Hat is, sort of) the best way to lose a lot of money is to place a market order for shares on the day they open. Here is a recent anecdote to back up the principle...
My darling wife is a wise day trader (a.k.a. White Collar Gambler -- really, she gets that a lot). As part of her setup for trading, she monitors both the AOL day trading chat room (known as the Shark Tank) and the IRC channel #daytraders. These are two resources that at-home day trader types use to maintain community. The AOL chat room has a maximum capacity of 100 users, while the IRC channel nominally has ~1400 users. Aside from commenting on the hair styles (or lack thereof) of the announcers on CNBC, they tell each other what they are buying as a sort of feedback loop for themselves.
On the day that MP3.com (NASDAQ:MPPP) IPOed, my wife got a message from her fellow daytrader (we'll call her "Jane Trader"). Jane was in a panic... she had placed a market order for 500 shares of MPPP and it had been filled at 98. Jane figured it would go way up -- after all, it's an Internet stock on an IPO, right? Well, when she messaged my wife, the price had gone down to 68 and didn't look like it was going to go up any time soon. On the advice of my wife Jane sold 250 shares at 70 as a hedge against a bigger loss, and held the rest of the shares overnight. We haven't heard the end of the story, but today MPPP is trading at 47.
The moral of the story is that IPOs can be a great way to lose a bunch of money if you don't know what you are doing. Even though a stock is Internet-related, it doesn't mean that it will start low and end up high in a nice, monotonically-increasing function. There can be an incredible amount of churn in the price of a stock during the day of its IPO. The key to this is that a newbie typically places market orders, which means that they get the market price. The market price is literally the price the stock gets at the moment the order is placed, which means that you get no control over exactly which price you get. Combine the two (churn and no control over price) and the result is a potential disaster.
Since so many people are jumping into the market, and since so many of those people have no clue what they are doing at first, there are lots and lots of people who are losing money. In modern America, this translates into lots of lawsuits against on-line brokers like e-Trade. It is for this reason that e-Trade has its policies about who can and cannot participate in an IPO. They don't love you; they just don't want to get sued.
It's much easier to make a lot of money on an IPO if you start out with shares that you got from your company when the price was 10 cents per option...
What exactly would an open source stock brokerage be? The source for their trading software is available for download off the web? Even if you could convince the exchanges to let you connect to them electronically I have my doubts as to whether the NASD and SEC would be too happy about it.
Somehow I have a feeling that simply having the source code "open" isn't what you meant. What did you mean?
I've read several of these posts on who's regulating who, I frankly would just like to invest a couple grand I have saved up into RedHat and not deal with a ton of hassels. I'm a coder not a stock broker, I'm sure I'm not the only one who's just interested in investing into RedHat and doesn't have much of a investment history.
Whats the easiest way to get in on this? Any tips from anyone? Who is the best company to go through to get in on redhat without having much of a history and like $5000 or so available to invest?
(Is it just me or wouldn't it be nice if they'd just automate the damn stock market so we didn't have to pay fees to some broker?)
Should Red Hat have known better? Hard to say. But *somebody* has to handle the IPO. I guess the question is whether Red Hat should have known in advance that they were dealing with pond scum (e-trade).
Should *you* have known better?
Hmm. Perhaps it was easier for me, or maybe I'm naturally more skeptical. All I can say is that when I first heard about the Red Hat IPO, my first thought is that it would be nice, but there's no way in hell that I'd be allowed into the front row where the spectacular profits are to be made.
So when the e-mail arrived from Red Hat, I was suspicious. (If *I'm* on this list, there must be thousands of others too.) Visiting the e-trade site and reading the fine print confirmed for me that this was just a scam to get people to open up accounts.
Hi,
Here is good news if you were really given an offer to participate in the red hat IPO (you lucky
bastard) the offer letter will tell you info to transmit to your broker. Any broker. They can not prevent you and do not screen you and you would not fill out an indication of interest with etrade or anyone else. You bypass that with an offer. The shares you were offered are allocated from the underwriters and have nothing to do with the number of shares that the broker may have been allocated to offer clients. You contact broker and tell them you have been offered shares in IPO and wish to deposit funds, they will want proof, which letter will supply and all you need is money in account to cover. By the way Etrade is going to be offering redhat, but they are not yet accepting indications of interest yet, so how could you be rejected? I don't like etrade but you can't be rejected from something that hasn't been offered.
I will never hide my dislike for on-line brokerage firms. I feel that they are very misleading and send people down the wrong road towards investing.
My god thats the exact same thing I was planning to do but prolly with 400 or 500 shares depending on if I get my payment for this last job in before it was too late.
This whole system is f'd up!
because the truth is, many linux people are glad to help others learn about and use linux, pointing out how it's free and freely available. Linux people rarely "hide" or obfuscate the facts. To do so leads to heavy flaming.
ETrade, on the other hand, kinda blows donkey.
They put just about the minimum info in their IPO faq/howto's to get you to send money, then you find out you need to be an "Experienced Trader" to get alerts on IPO's -- something like thirty trades over three months.
Since you are a newbie, you get the joy of checking their IPO offerings once an hour, which is what they recommend. Do this for a couple weeks, and there won't be a whole lot of your brain left. Javascript bots, anyone?
Finally, after all that, you fill out a questionaire and get rejected anyway, so you get pissed and close you account, take your $5000 or so and go buy a couple used dirt bikes or something.
According to https://trading.etrade.com/cgi-bin/gx.cgi/AppLogic +IPOTombstone?Message=IPOrhatt:1, etrade doesn't expect to be accepting indications of interest yet. Maybe it's just a bug in the system? Why not just call and ask. In the e-mail from Red Hat, it gave a phone number and a PIN to call to ask questions.
Huh? That's like saying that a person who is really good at writing software would be making a fortune himself and wouldn't be giving it away for free.
Believe it or not, some people actually like helping other people.
And rather than spending the time to do "proper research" I can pay someone else to do it and spend the weekend having sex or whatever else I think is more important than researching companies.
Just because someone doesn't make the same tradeoffs you do in life doesn't mean they don't have a reason.
They are here to protect us from "losing" our money or because it is a "risky" investment?
HAHA, I wish Los Vegas worked the same way.
Seriously if the company says it is ok for you to get some shares before the public, and you have the money up front, and you sign a paper saying,that you are a legal adult, sane adult, understand the risks involved, will not hold anyone liable but yourself. They should let you in on that sweet RH IPO.
sweet is not a fact, it is an opion of the author, which in fact, may not be really an author
You only slated $1400 for redhat stock?!?!?
Last I heard, you had to dump a minimum of $7500
in order to participate...
/
The other underwiter (Goldman Sachs) doesn't even place restrictions on place of residence, as E-Trade does. Just go to any bank in the world, submit a "buy" slip, and they will work with Goldman Sachs to get you the shares. Minimum investment requirments are only if you want an account directly with Goldman Sachs. If you have less money, work with a bank.
Have you tried opening an account with an are Goldman Sachs?
They are the lead under-writers after all.
Plus, you will not have to go through an automated system in order to get the shares that you have been offered.
It's more like RedHat offering you a car through a dealer, but the dealer finding out you're underage. No car. Redhat isn't responsible, they did what they could for you, the laws guiding the item that they offered you won't allow it, and Redhat has no way of knowing beforehand who is ineligible. You should take it two ways:
1) It's a nice gesture for those who've reported bugs in the past
2) RedHat wants their stock to go way up, so why not invite extra people to participate who normally wouldn't trade stocks? We're not above that sort of thing...
-Adam
Aren't there any laws against discrimination based on race, nationality and place of residence? Place of residence is one the exclusionary criteria, it's even mentioned first in the error message that you get when attempting to IOI after being rejected.
Unfortunately, "the letter" is just an e-mail. I doubt would have any force of proof. You could just as well have written that textfile yourself and printed it out.
The reason why "the letter" works (or, rather: should work) with E*Trade is because E*Trade has been given a list of email addresses of the people how are invited, and they can checks your account info against that list. Moreover, the letter contains passwords to get into areas that are restricted to normal users. Both of these items that vouch for the authenticity of the letter are unfortunately not available to other brokers, so how can you convince them that you just didn't make it up?
Surely Red Hat wasn't aware that this would be a problem when it offered the shares to the community. It sounds as though this is an automatic response by E*Trade's systems--another example of the problem of letting computers make decisions that should be made by people.
The questionaire preventing people from reserving stock in RedHat's IPO is an SEC questionaire in place to enfore SEC rules. E-Trade has to have this in place to comply with SEC rules, not because they wish to prevent people from investing in IPO's themselves.
I am not a US resident, and indeed, got blocked because of this.
However, instead of giving up, I called them at their support number
given in the "letter", asking if there was any way to get this
restriction waived, as it was obviously against the wishes of the
customer (Red Hat). Indeed, as everybody knows, many, if not most,
Open Source Developers are not American. Case in point: the great
Linus Torvalds himself was Finnish before he joined Transmeta.
The answer I got was as simple as it was surprising: Just submit a
change of address to an American address (in order to do this, log in
to your E-Trade account, chose "Change Personal Info", then "Change
Street Address"). Usually changes are performed within 3 business
days. Once you have your shares, just change it back, so that you
don't miss your account statements.
Another, cleaner, way would be to get a friend involved who resides in
the US, and who you trust to set up a joint account. However, the
inconvenience of this is that he might need be liably to capital gains
taxes on your speculations.
From "The Letter":
All applicants for public offering stock will be required to submit and
pass an online eligibility profile at the E*TRADE web site. Public Offerings
are considered speculative investments and therefore you will be required to
answer a series of questions about your Investment Experience, Goals and
your Financial Background.
Perhaps RedHat could have emphasized this more, or pointed out that it's an SEC regulation.
If they're going to screen on these criteria (as they have to), then it should be obvious what sort of answers they're looking for. For example, If you say your investment objectives are income or capital preservation, then you shouldn't be surprised if they think you shouldn't be investing in IPOs. Obviously they have no way of checking your answers anyway, but by asking they've satisfied the SEC and covered their ass in the event that you lose money and feel like trying to blame them...
Greetings,
As the Subject says, I am glad that this topic is up here again, because I am seeking my relative who got this invitation. You know who you are. You see, my father who CAN qualify, and DOES have the money to buy it, and is interested,
knows that you can't. Unfortuately, we misplaced your email address and all the information you gave us before asking us to help you out and purchase the shares for you (if they are alloted/possible). We are very sad, as we know that we can both benefit from this, and would be proud to share this ability with you. So, please, cousin, drop me an email at the address I created just for you -- allthattimetogo@yahoo.com
I signed up for e*trade this week as well,
with the intention of trying to get my hands
on some redhat stock (among other things).
There "IPO Center" states that they will
begin taking "indications of interest"
sometime in early to mid August. I don't know
what form this guy filled out, but I can't
find it anywhere on e*trade's website.
LL
"If you are falling, dive." -Joseph Campbell
The limit's being placed on initial investors at E*Trade is to protect unexperienced investors that are not aware of the pitfalls of an IPO. IPO's usually aren't accessable to the general public. It used to be the province of institutional traders. Companies like E*Trade are changing the face of investing (for the good).
There may still be a few bugs in the process but they will be ironed out over time.
--ralphieboy
Does this seem like the old bait-n-switch tatic to anyone else?
"We're sorry, but you can't buy into that fantastic too good to be true offer that we spammed your mailbox with, but now that you've gone to the trouble of setting up your account, you're free to invest in any of the other fine stocks we offer for sale here."
I am also curious about the assertation that they do this for your own good, when exactly how do they prevent you from losing your shirt on non-IPO transactions? Gambling is gambling, IPO's are just for higher-rollers?
I'm not going to blame Red Hat for this, but it is frustrating. I assume this will also put a end to community invites from future linux IPO's such as VA linux systems upcoming IPO.
When Red Hat employees try to buy shares do they get screwed the same way that you and I have? I doubt it.
When I was denied the shares, I was told by E*Trade that the reason was because of SEC regulations. After having talked to people at the SEC about the rules governing IPO's, there is nothing stopping E*Trade from selling the shares to me. In another discussion with E*Trade I told them that they were full of crap and quoted back to them the info from the SEC. They then came back (after about 3 minutes on hold) with the fact that it was house rules.
If E*Trade was concerned about me going bankrupt as a result of losing money in this deal, they would have also asked about my debts. If they were really concerned, they would "protect" me from buying the shares once they are being publicly traded at $50/share. The fact that I sent them $x when I have six times that in the bank and mutual funds had no bearing.
E*Trade is not trying to protect us. They are looking to build their customer base. They don't really care how much money you have-- you just need enough to line their pockets. They really want the people that are going to be doing lots of trades with them so that they get the $20 trading fees over and over. If you are a first time investor in stocks, you are not likely to be doing 5 trades per week. E*Trade doesn't care if they piss off people that are not likely to use their services. They want the people that have the potential to pay them lots of money to have very warm fuzzy feelings about how E*Trade helped them into a good deal.
If Red Hat really wanted to distribute the shares as their invitation letter suggests, they would have come up with a contract with E*Trade that made it so that E*Trade would not have so much lenience with their house rules. I place just as much blame on Red Hat as I do E*Trade. Red Hat may be getting the blame for being stupid, though. I expected E*Trade to be weasles.
There are three categories of stock purchasing going on for this IPO.
1. Common public offering. Those are the people who get the 2 hour window on Etrade to sign up.
2. Open Source Community. They got an email that indicated an account to sign on with for the IPO.
3. Friends and Family. They should also get an email that has an account to sign on with.
What I was told yesterday, by Etrade, was that the first two *do* have to pass the standard requirements for an IPO, while the friends and family program does not.
So, if you happen to know someone at RedHat and got into it that way, you should be all set. Otherwise, you do have meet the requirements and could end up screwed. I've yet to try the Friends & Family approach as my account on Etrade has no money yet and I haven't received my email. I just hope it works.
Flippantly, a brokerage run like an open source project. Run away in terror!
More seriously, a brokerage that specializes in open source stocks. Not that there are very many of them -- and that's probably a good thing. Can you imagine the government getting involved in free software? Next, you'll hear Al Gore inventing gcc.
--
QDMerge -- data + templates = documents.
how to invest, a novice's guide
Stock traders are tired you newbies asking dumb questions. In spirit 'Debain users get tough on newbies' I say to hell with your questions.
Just read the freakin' public laws and regulations. You can't figure it out for yourself?
(I'm only half kidding about this; see how we all need to help each other along in the digital age?)
-----------------------------
Computers are useless. They can only give answers.
-----------------------------
Computers are useless. They can only give answers.
-- Pablo Picasso
I am a long time Linux Developer, got the letter, went and opened an account with e-trade. I took the questionair, thought I did a fantastic job. It took 30 seconds for the system to churn out an answer. It said Nope.
What the hell? I would be an idiot if I didn't know the risk! I WANT to take the RISK, ok?? I will sign up to take the risk. I want it. I just want to own the stock, and get it at a good price.
I don't understand, what can I do? If anybody knows a way around this, let me know.
davenrs@mailexcite.com
I said no... but I missed and it came out yes.
So you have see the E-Trade Ads huh?
Bravo!
Brokers are there (hopefully) to direct you towards the best growth with the least amount of risk. Historically, the best methods of investing involve next to no "trading". This explains why the best profesionally paid mutual managers rarely even beat the market averages.
Yes, good day-traders eventually make billions of dollars by taking advantage of market swings and short term jumps. Oh wait!! Come to think of it,
I have not heard of a single person who has amassed a great fortune through active day-trading and jumping in and out of stocks and the market.
But I have heard of Bill Gates... the richest man in the world. How often do you think he is jumping in and out of Microsoft's stock? I have heard of Warren Buffet, the second richest man in the world. He owns approximately 8 stocks, and has NEVER jumped in and out of them.
Day trading is not the road to riches, despite what E-Trade tells you. No one in the history of the world has been able to outguess the market for any extended short-term periods of time. Do not fool yourself.
I just received this in my inbox (bcc).
Subject: interview for Wired News
Hi--I'm a reporter from Wired News working on an article about RedHat's
offer to sell shares at the IPO price to members of the open source
community. Judging by the thread and poll on slashdot, and some e-mails
I've gotten, there's some concern about getting access to the offer.
If you have a minute, I'd like to talk to you about this. I can be reached
at 415-276-8472, or e-mail me with a number to reach you at.
Thanks,
Polly Sprenger
Wired News
If he really got the letter, he would have been told to contact a certain person at E-Trade. You don't have to fill out any forms. Just e-mail him your E*Trade account number.
I think we need an Investing Linux HOWTO.
(If anyone takes this seriously, email me -- I want to read it since I know nothing about Investing..)
_______
2B1ASK1
I wonder if Redhat will cover this thread on their site.
The "protecting you" explaination is pretty weak, though that's what I was told by Etrade on the phone when they told me I wouldn't be allowed to participate. The public can blow money any way they wish, including blowing thousands on state lottery tickets, but they can't spend the same money on IPO stock? What a crock. This really reeks of keeping the money in the hands of the rich. ;)
It was an amazingly generous offer by Red Hat. Too bad so many people are being screwed by this "profile" nonsense.
Now we just need a CSPP plan, where "C" is community.
IANAL, but I'm pretty sure you can't sue the govt unless they give you permission to sue them.
However, in this case the SEC is not preventing you from making the trade. E-trade is.
However you are also not likely to be able to win a lawsuit against them either. They are most
likely operating under what is know as a 'safe-harbor'.
A 'safe-harbor' is a way that companies protect themselves from silly lawsuits. Basically what
this means is a regulatory agency (like the SEC) say you should operate in a certain way. If the
company does it that way, the company has a built-in defense in saying "hey we didn't cause
intentional harm", which means any chance of big lawsuits is out.
Part of the SEC 'safe-harbor' provisions for IPOs are that the IPO share must be distributed to both
large and small investors, and that investors don't bet too much of their net worth on the IPO,
and that the investors know what they are getting into (hence the experience factor).
E-trade is probably complying with these 'safe-harbor' provisions, so any lawsuit is unlikely
to succeed (since you would have to prove they directly discriminated against you instead of
it just being a consequence of their actions).
Keep in mind, there are only so many shares to sell. In any "fair" scheme, many people will get
left out in the cold.
That's it. That's the only question they should ask. S-1 statements are full of warnings in all caps that say
It is called Cover Your ASS (CYA). If a numbnuts investor buys the IPO, it tanks, he sues E*Trade, E*Trade has some pretty damning evidence that numbnuts knew what he was doing, because he said so on the form. Blame lawyers, not E*Trade.
If you don't have any stock trading experience, you shouldn't be buying an IPO. Period. No but's. If it were not for self-regulation by brokers, all individual trading would be prohibited. There is such a thing as suitability in securities industry and you just don't qualify. I don't want to see people like you to lose money and then whine to NASD and SEC how you never touched a stock in your life but they talked you into a risky IPO, prompting more regulation.
E*Trade has a legal obligation to "know their customer" because they are a registered Broker/Dealer. Because of their obligation they have to qualify customers who are purchasing stocks, options, etc. I'm sure if E*Trade could sell you pieces of the clear blue sky, they would and still get a commission. Thankfully, the SEC regulates brokerage firms to prevent them from doing this.
...and lastly, since I'm at work and should really do something so they keep paying me. E*Trade is not the only one which is selling the IPO. Goldman Sacs is the primary underwriter. Of course you may have issues with their commissions.........
As for your qualification, when you initially opened the account they probably asked you all of those questions anyway to try and qualify you for options, etc. With that information they could have gleaned that you weren't a likely candidate and shouldn't have sent you the letter. (hopefully they have this type of cross referencing in place) Otherwise it sounds like you opened a cash account instead of a margin account and they didn't have the info they needed to qualify you as a registered investor. Once they (E*Trade) were able to determine this they *had* to decline your request or you could take them to arbitration (and get money) because you could say that E*Trade should have known better than to sell an IPO to an inexperienced investor.
How do you get around this? Either start investing more and gain the experience or....lie. The brokerage firm has no idea if you are lying and really doesn't care as long as you have signed a contract stating that you are experienced. Brokerage firms do not have access to other firms trading records. Thus you could tell them that you play Butterfly spreads and foreign currency sythetics for fun and they have to believe you.
Red Hat has no clue who their IPO is being sold to. All they know is that E*Trade bought XX Million shares and E*trade is selling that many shares to customers. Do not be angry at Red Hat for a screwy system for IPOing securities. =)
Jayson Pifer
Never go to sea with two chronometers; take one or three.
>> At that point presumably if you got a letter you will automatically get approved. Otherwise, E*Trade will use things like your current acct. balance, past trade activity, and the amount of shares you want to buy versus the total left to determine if you can get in.
Well, no on both counts. Read the thread you just posted to. They never ask how much you want to buy, and the letter isn't automatic approval.
E*Trade has not yet started taking indications of intrest on the RedHat IPO. Also just because RedHat says come buy our stock does not mean you will get it. E*Trade only gets a certain amount of shares and those are distributed by lottery from qualified investors. E*Trade asks those questions to help keep the SEC at bay about selling speculitive stocks, like IPOS, to people that may not know better then to blow thier life savings on a stock. Also I don't know if I would count on the RedHat IPO taking off.
That's a ridiculous statement... regardless of your experience if you understand you could lose every dime the second you invest it, you have enough understanding to participate.
... all the Open Source people outside the United States. It looks like sheer sarcasm to send out the IPO email to all Open Source people world wide and then include a notice that the offer is available to US residents only.
Everyone can sign up at e-Trade, not only US residents. I wonder why they did that.
Fionn
has anyone gotton "accepted" yet, and if so, how did they go about filling out the survey? There are 6 million shares to be distributed...share the knowledge a little...
Does anyone know if you can do the screening a second time, if your financial situation, goals, or experience change?
Anyone out there who has *passed* the screening? We've so far established that having enough money in the account, having over $50k liquid assets, and having income to easily cover the loss are not sufficient to pass the screening. What *is* sufficient?
I've had an E*Trade account for a while (yes I know better, but once upon a time E*Trade was the only/cheapest game in town). Anyway, if you want to get in on an IPO here's how it works:
E*Trade sucks. Open an acct with Datek for normal trading.
----- obSig
Personally I just dumped $3700 into an etrade account only to find out that I need to yank it all back out and stick it back in my savings account. What a pain in the ass.
$3600 (assuming $12 a share) isn't going to bankrupt me. They should have at LEAST asked how many shares do you want at max price of X. Then figured out if it's going to bankrupt you!
At the worst, I'd be more then happy to sign a document that says if the shares tank I won't sue. Personally I was planning on buying 300 shares and holding onto at LEAST half of them for the long term. Ohh well... They can close my account for all I care.
--Mark
There are no current laws prohibiting first time investors from getting in on IPO's. However, the underwriters of the stock get to pick who they give the shares out to and most require you to fill out "forms of eligibility" that they use to screen you out. You can read more about this on the eTrade site and other online brokerages
This might be little consolation to the rest of you, but I would like to put to rest a lot of the FUD here.
I am a fairly ordinary guy, with a decent amount of stock/mutual fund investments. I got the letter, I gave the answers, and I was approved. I also "indicated my interest" for a certain number of shares, and everything's set and ready to go. I did this all by phone -- the E-Trade web stuff seems to be severely broken.
So I have seen no evidence that this is an elaborate scam to keep out the little guy, or anything like that.
Look, all this whining about the
Red Hat IPO is ridiculous.
First, you should feel privileged that
Red Hat invited you to participate
as "friends and family" in their IPO.
Second, if you have no investment
experience, too bad, you should not be
touching this with a ten-foot pole!
You need to be a somewhat experienced
investor before you should even
consider speculating with IPOs.
Read every investment book you can get
your hands on, start investing (not
speculating) now, and in about five years
you may be ready for soemthing like this.
That said, as an invitee I've got my IOI
in with E*TRADE for a few hundred shares.
But I'm prepared to lose it all!
There are significant restrictions on the sale of stock by a company. One of these requires that purchasing individuals be experienced traders.
The shares involved aren't *public* shares yet. They would be coming right from the company.
Among other things, this is to prevent scam artists selling lots of worthless stock in their private company to gullible people.
I don't think this was Redhat's falt. They made a best effert to give back to the people who have been developing code in the RedHat distribution.
I have a friend who is a member of GNOME. He is 16 and received a letter. Even with 50k in his pocket, there is no way he could answer the letter. He can't sign a contract.
I was hopping to answer the letter for him. RedHat doesn't know him. The trading company dosn't know him. They just made the offer to an email address.
I am also a developer so he was glad to let me take it over. However, I know better then to put 1.5k into an account only to be told NO.
If I had real money, I'd Buy the email address of some of the people who can't take advantage of the letter and buy lots of shares.
There are 10 type of people in the world, those who understand binary and those who don't.
Didn't get the letter, but isn't this SEC rule just a way to limit the participation in IPO's to those who are already rich? Sure, IPO's are some of the riskiest investments that can be made, but they're also provide some of the highest returns. If I know that the RedHat IPO is a good deal, why can't I invest my life savings in it? Who is the SEC to say that I'm not rich enough to play in the game? As it stands, the SEC is acting as the muscle for some fat cats who don't like the unwashed masses moving in on their exclusive territory.
Aah, change is good. -- Rafiki
Yeah, but it ain't easy. -- Simba
This is from the SEC's website I will be looking at the National Association of Securities Dealers, Inc to determine my eligability for the IPO.
Individual investors may be unable to buy shares in an initial public
offering or IPO, for a number of reasons. When an IPO is "hot," appealing
to many investors, the demand for the securities far exceeds the supply of
shares. The excess demand can only be satisfied once trading in the IPO
shares begins. This imbalance between supply and demand generally
causes the price of each share to rise dramatically in the first hours or
days of trading. Many times the price falls after this initial flurry of trading
subsides.
The way companies become public through an underwriting by a
broker/dealer determines who gets to buy IPO shares before they start
trading. The IPOs of all but the smallest of companies are usually offered
to the public through an "underwriting syndicate," a group of underwriters
who agree to purchase the shares from the issuer and then sell the shares
to investors. Only a limited number of broker-dealers are invited into the
syndicate as underwriters and some of them may not have individual
investors as clients. Moreover, syndicate members themselves do not
receive equal allocations of securities for sale to their clients.
In most cases, the underwriters assume the risk of the offering by
agreeing to pay the company issuing the shares a set price per share,
whether or not investors buy all the shares being offered. The managing
underwriter and the company decide on the basic terms and structure of
the offering well before trading starts, including the percentage of shares
going to institutions and to individual investors (retail customers).
It is unclear how "hot" the offering will be until close to the time when the
shares start trading. Since "hot" IPOs are in high demand, underwriters
usually offer those shares to their most valued clients.
We receive complaints from individual investors who believe that new
rules should be put into place to assure that IPO shares are distributed
more widely. Some have suggested that we require a lottery to distribute
IPO shares. Unfortunately, instituting and enforcing a lottery would create
substantial costs that would undoubtedly far outweigh the benefits.
Although we sympathize with those who want the chance to buy "hot"
IPOs, it is unclear how we would successfully mandate such access.
The General Accounting Office issued a report on the allocation of IPO
shares. Their research indicates that most underwriters target
institutional investors in IPO distributions for a variety of reasons.
According to the report, underwriters believe that institutional investors
are better able to buy large blocks of IPO shares, assume the financial
risk, and hold the investment for the long term. However, underwriting
firms that have a high percentage of individual investors as clients are
more likely to allocate portions of IPO shares to individuals.
Underwriters generally have wide latitude in allocating IPO shares. To
maintain the fairness and integrity of IPOs, the National Association of
Securities Dealers, Inc. has rules governing these "hot" issues. These
rules ensure that the brokers, dealers, and underwriters make a bona fide
distribution to the public and not keep these "hot" shares for their own
benefit. The rules prohibit firms from keeping these shares in their own
accounts or selling them to their directors, officers, employees or to other
brokers/dealers. The rules also restrict sales to particular groups of
people. Both the SEC and the NASD periodically examine underwriting
firms for violation of these rules.
GOD_ALMIGHTY at work
Geez, I love all the conspiracy postings....
/. mentioned redhat's intention to go public. Later, I decided to try to get in an IPO to make sure I could do it when RedHat came about. I too was naievely honest and filled out I didn't have much experience, and it rejected me.
I opened an account with E-trade as soon as
I called E-trade and complained and they explained that it's the SEC's regulations that decides it, not them, and it was out of their hands. At that point I wasn't eligable for that IPO, but they said future IPO's I could change my profile and maybe I'd be eligable. It hurt, because it was for china.com which doubled within days after the IPO...
Well, the next one came about, and I changed my profile to say I knew what I was doing, and sure enough I was able to get to that one.
Bottom line, it's SEC's regulations, not E-trade, not a microsoft conspiracy, not a government/republican plot, not anything else. Plain and simple.....
Brokerage firms have a fudicary responsibility to "know" their client. Thus if you are a newbie when it comes to investing a brokerage firm has the responsibility to make sure you are investing relitive to your responsibility. Having worked at a brokerage seen many lawsuits from "conservative" investor who would get into IPOs, margin accounts who would sue and win their losses back because a broker let them trade above their experiance and risk tolerance. Etrade is just covering their arse.
The NYSE, NASD, and every other stock exchange authority has rules that limit the behavior of broker-dealers for the protection of investors.
NASD Rule 2310 "Recommendations to Customers (Suitability)" is probably what is controlling here. The rule states, in part:
(a) In recommending to a customer the purchase, sale or exchange of any security, a member shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts, if any, disclosed by such customer as to his other security holdings and as to his financial situation and needs.
I can't find an interpretive memo on point, but I'm guessing that every member of the underwriting syndicate must be construed to be "recommending" the stock.
I agree that the rule may limit some people from investing in lucrative IPOs - but overall I think the rule is sound. It provides recourse against any shady person who sells IPOs (or other risky financial instruments) to investors who are inexperienced or not able to bear the financial risks.
Here E*Trade is also protecting themselves. If Red Hat should tank (I mean, after we all switch to the OS panacea coming from Redmond next year who'll need Linux?) they don't want you to claim they duped you into buying something that wasn't a suitable investment for you.
IMHO you should be able to call your broker and explain the circumstances and make an argument that you are particularly suited for this or that risky investment. Because of E*Trade's business model they may not be able to provide that kind of full-service relationship.
Disclaimer: nothing in this post constitutes legal or investment advice.
Geez, I love all the conspiracy postings....
/. mentioned redhat's intention to go public. Later, I decided to try to get in an IPO to make sure I could do it when RedHat came about. I too was naievely honest and filled out I didn't have much experience, and it rejected me.
I opened an account with E-trade as soon as
I called E-trade and complained and they explained that it's the SEC's regulations that decides it, not them, and it was out of their hands. At that point I wasn't eligable for that IPO, but they said future IPO's I could change my profile and maybe I'd be eligable. It hurt, because it was for china.com which doubled within days after the IPO...
Well, the next one came about, and I changed my profile to say I knew what I was doing, and sure enough I was able to get to that one.
Bottom line, it's SEC's regulations, not E-trade, not a microsoft conspiracy, not a government/republican plot, not anything else. Plain and simple.....
Oh, on the down side, you have to buy in lots of 100 shares for IPO's...
If you think this is a scam. Post your ID and Passwrod from your letter here.
If a bunch of people post the offer will be withdrawn I'm sure.
There are 10 type of people in the world, those who understand binary and those who don't.
My mom works for an investment company.
That makes it illegal for me to buy/sell any "hot" stock (a new stock that rises more than 1/8 in the first 4 hours on any given day) or get into an IPO.
It's not necessarily a good reason, but it's a reason nonetheless.
--
Ben Kosse
Remember Ed Curry!
The phrase "experienced trader" is misleading, it's extremely unlikely that they have any interest in protecting you from a risky investment.
Historically IPO offerings have been available only to active traders at a given brokerage house and the ability to invest in an IPO is considered by the brokerage house to be akin to an award for your past patronage.
In this case "experienced trader" should likely be substituted for "active trader".
Bill
Sure the regulations are overprotective, but they are there for a reason. The stock market crashed which catlyzed The Great Depression. People who knew little about the market were buying and selling on margin, the market tanked, and a lot of people lost their shirts. The SEC's job is to prevent something like that from happening again.
Don't get me wrong. A company one of my relatives works for just went through an IPO and I would have loved to get in on it.
BTW My relative was also telling me that everything leading up to the IPO was pretty restrictive so that they wouldn't get in trouble with the SEC (or get sued if the stock tanks...)
Things to do today: See list of things to do yesterday
I wanted to buy some RedHat stock too (somehow I
got one of these letters too), but you can only
use this service if you are in the US.
damian
Redhat can by a substantial amount of the stock on their own though and then sell it directly or give it to whomever they choose. Or they could just not sell a large amount of it initially and then do what they wish with it. It's more work for Redhat but they can sell it as cheaply as they wish and brokerage commisions can be avoided. It they are really serious about giving stock to hackers, which would be a really cool thing to do, they can make it happen. Not many companies are willing to bend that far over like that though.
The gesture was kind and Redhat should be respected for it. The old addage is true, it takes money to make money and unfortunately a lot of hackers aren't rich.
This is my signature. There are many signatures like it but this one is mine..
You really can't blame Red Hat too much - they were trying to give the little guys a shot at their IPO. The IPO biz is usually kept for a brokerage's big clients and lets them get in and and out and make a good deal of cash. Individual investors seldom get a chance at them.
The revolution will NOT be televised.
They are one of the lead underwriters. It's on EDGAR, on the SEC forms.
Which is why you (stange as this sounds) have a far better chance, even with all these silly rules they've imposed, have a far better chance of getting RHAT shares through E*TRADE than if you use one of the other brokerage firms.
I mean, I'll get some there, but not as many as I'd like. I'm willing to take my chances on E*TRADE for some more shares, and can always use the extra services to kind of balance out my portfolio. So if I just buy a few shares of a stock, I'll use E*TRADE, but when I make an order of more than $10K, I'll do it on the larger accounts with the larger brokers (I use Schwab and Morgan Stanley Dean Witter).
Will in Seattle
Just in case this was officially spam, Why not just get them to sign the check--and I like another AC's oppinion that we should leave $1 in the account just to keep them sending statements....8)
Anyway, Seriously, this SUCKS! I make alot of money and should be able to spend my money any way I want--except for that large chunk ol' uncle sam takes for himself--and this sec stuff--Well, what ever happened to Caveat Emptor?
Darkharlequin...zeits.net
There is a catch though: you probably wouldn't be able to leverage your "letter" that way, and without it the probability of getting any stock would be extremely low. Or does anybody know a way to get the RHAT letter acknowledged via this channel?
Yeah, you're right. The "letter" states more or less clearly what the restrictions are. However many of us started undertaking steps to transfer their accounts long before they got their letter. Indeed, when the first rumors came out by end of may, it was not yet clear whether the IPO would finally take place in July, August, or whenever. And E-Trade warned that it could take up to 6 weeks to transfer an account. So the "careful" person better undertook the necessary steps right away, in order not to miss the deadline.
The idea is that you place a bid for the number of shares you are interested in and a price. When the bid deadline arrives, the bids are ranked in descending order by price. Starting from the top, bids are accepted until there are no more shares left. Then (and this is the key) all the people who have had their bids accepted pay the price of the lowest accepted bid. This is called a "Vickrey auction." It seems a lot fairer to me, and I hope the company gets some decent IPOs and survives.
I actually called back to etrade AFTER i got denied by the first broker. I made him explain in no uncertain terms what happened. He said Etrade sits down with the company before hand and determines which criteria it wants to allow people with. He said the SEC requires that they do the questionnaire but that there is no SEC ruling that requires certain responses to get in on an IPO. I'm still miffed about this. And now I come to find out they lost my cashiers check that was sent in and no funds are in my account. Be sure when they do get there I will open another account and answer the questionaire again and hope I answer the way they see fit. Then when everything is said and done...I transfer everything to datek because these etrade practices have caused me entirely to much grief.
"Fighting the underpants gnomes since 1998!" "Bruce Schneier knows the state of schroedinger's cat"
As pointed out by a previous poster, exchange rules dictate that when you open an account, you
must state your investment goals and experience. It is indeed to protect
you, the consumer. Since this was an oracle handling the account opening, it was just probably following its rule set of not allowing inexperienced traders from participating in IPO's. If you talked to a human broker, the case would be different. S/He would be able to understand that you wanted to invest long on Red Hat. Etrade costs are low because you don't rely on a human broker. You get what you pay for. I wonder how web brokerage houses will do in a bear market...
At least you guys have a shot at participating. Generaly, brokerage house rules do not allow employees from exercising trades outside of their own house. We couldn't get in on the IPO if we wanted to since it must be done through Etrade. Even being at a brokerage firm doesn't help, as our trades go last and at the worst price, in order to favor the clients.
Invest smart: invest for the long run and don't get hung up on this IPO as a way to make a quick buck. Educate yourselves and talk to a broker if you never invested before.
look at http://www.wired.com/news/news/business/story/2098 8.html
darkharlequin
matt@zeits.net
Out of curiosity, did anyone who was invited to participate and completed the profile pass the eligibility requirements and successfully indicate interest to purchase shares?
People being invited to buy aren't going to buy publically-traded shares. They'll be buying privately traded shares directly from Red Hat. (This is the whole point - getting shares before they are publically traded, with the resulting price increase.) This may technically happen minutes or seconds before public trading happens, but the effect is the same: the shares you buy will be coming from Red Hat's cache of shares, not from Bob in Minneapolis.
In other words, the SEC requirements are on Red Hat, not E-Trade. But E-Trade is acting as an agent for Red Hat, so E-Trade is required to also follow the requirements for the sale.