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Salon on the Red Hat IPO Eligibility
Definitely the hot topic this week. Salon is running a quite passionate article written by a hacker who was rejected by E*Trade
to participate in the RH IPO in august.
his story reads like many of the emails I've got in the last couple days. Hacks don't have liquid net worth, so they're being
rejected on that grounds? Its a good piece.
If the invitation from Red Hat was so "special" and they really did allot a certain number of shares for "the community," why do offer recipients have to go through the "expression of interest" process? It seemed like Red Hat was extending a kind of "friends and family" offer, but instead I guess they were saying "Hey, if you want you can get in on the IPO at the same level as everybody else in the world."
I did not receive the letter, but the announcement of the IPO induced me to open an E*Trade account and I'm in pretty much the same boat as all those other guys. So what was the big deal Red Hat was offering?
Kook9 out.
Isn't E*Trade just:
:-)
1) Following rules and regulations, and
2) Covering their ass?
And, the offer letter included notice that there would be a screening, and a link to a sample eligibility form. If you think about it just a little, and look at the form, you could probably have figured out what it takes to get past the screen.
Class action suit.... geez. Whatever. This is the STOCK MARKET, folks. The rules are a bit different (and stricter) than those a lot of Linux supporters are used to, but it's not a grand conspiracy. It's the Way Things Are(tm), for better or worse. All of this "F**K ETRADE" and "F**CK RED HAT" is spitting in the wind. Might as well say "F**CK THE AMERICAN CAPITALIST SYSTEM" - and perhaps you should.
I'm sick of being told that I'm being protected from myself.
In my state you have to get a fscking license to buy grain alcohol because some idiots died from drinking too much booze (it's usually vodka that people overdo it with, yet grain gets the blame). So statewide only bars and people with political clout can get the license to buy grain alcohol, and we're tole that this is to protect our college age "kids" from themselves. If some asshole wants to put a 750ml bottle of Ever Clear into a beer bong and fry his brain, I say let him/her do it. There's just more
In many states, like my own, we are required to wear seatbelts in our cars. I was an avid seatbelt wearer before the law was passed anyway, so it didn't alter my behavior in any way. But I think that it's horseshit to make it mandatory for adults to "Buckle Up". If someone doesn't want to use a seatbelt and gets turned into hamburger, fine that was his/her choice. It just causes the nations average IQ to go up.
Motorcycle helmets are also mandatory in my state. I remember a local radio/TV personality (John Cigna sp?) was a rather outspoken opponent of mandatory helmet laws until he went headfirst into a brick wall (a la Gary Busey) and the helmet kept his brain on the proper side of his skull. I don't hear him talk much about how those laws are unfair now. BUT, if he wanted to ride without a helmet he should have been able to. If someone is reckless enough to do 60mph down the freeway without head protection, the world might better off without them.
Now back to the IPO, this is the lamest of the "protecting people from themselves" cases that I have seen in years. In the other examples that I listed above the protection is only against something bad happening to the individual, what I mean is that nothing "good" or "great" can come from buying grain alcohol (except maybe a good game of "get the girls drunk"). This however not only protects inexperienced investors from the potential pitfalls of an IPO, but it barrs people from reaping the potential benefits of the IPO. The IPO gives many people who were influential and hard-working in the open source community the opportunity to gain something for all of their hard work. Other people are making money off of Linux, who not the people who helped make it what it is today?
LK
"Hi. This is my friend, Jack Shit, and you don't know him." - Lord Kano
Might I suggest that if you are planning on holding your shares for 5+ years, that you just buy them in the aftermarket, like most mortals?
This isn't a wise-ass suggestion: Amazon.com went up tremendously on its first day, but if you had bought & held, even with the 30-40% drop it's taken recently you are still making well above-market returns. A quick look at the chart shows that you would have made about 1000% (yes, one thousand percent) if you bought the stock any time in July, 1997 and held it until now. Two years folks.
Another thing to keep in perspective. Don't shed a tear about missing Red Hat. There will be many, many other good investment opportunities along any minute, probably many of them Linux and/or open source related. The opportunities aren't going to dry up and stop coming. Some day, it may be YOUR company going public!
--
I mean, everyone seems to have the impression that an IPO like RedHat just can't lose. That is wrong, wrong, wrong. Look at what happened to MP3.Com (ticker symbol MPPP); they've been in a tailspin since the day their stock started trading.
Very few of us /.'ers qualify as even remotely savvy investors, so I can see E*Trade taking steps to protect us. It's like telling your boss that he probably shouldn't have "pre$ident" as his password. He might not like having a more difficult to remember password, but you and I both know that its for his own good and for the security of the entire company.
So, give E*Trade a break. We geeks like to think we know everything, but this is an area where a lot of us are pretty much lost.
Besides, I think DSCM is a better investment right now. =)
----
Every year during my review, I just pray the words "slashdot.org" aren't mentioned.
The reason why I am upset with this is that I wanted to spend my money on these shares. Not to get rich and sell them in a day. I plan on holdering on to 50% or more of these shares for the long term (5+ years).
It is the same reason why I go to Best Buy and buy Red Hat Linux. I have a fast enough connection, I know what I'm doing.. but I still buy the package because I want to support Red Hat.
Now I suddenly have the opportunity to buy Red Hat "before" the general population. I might make some money, I might not. I personally don't care about that aspect of the investment. The investment that I am making is in Red Hat as a company, not the price of a few shares.
I am not upset at Red Hat. I'm am only partially upset with e-trade. The reason? Because their "know your investor" doesn't know their investor. The problem is that a LOT of the investors with this IPO are like me. They want a piece of the pie for the long term, they have money they are willing to lose. And, if you are not willing to lose your money you shouldn't invest in the stock market at all. Thats what banks are for.
--Mark
I'm the author of the Salon article, and (as might be obvious from reading the article) I read slashdot. I also read email, for that matter. Or you could read my homepage. All the same to me. Just try to leave me enough free time today to hack some on my compiler and write some on my thesis, K?
[
Wow, that guy sounds dangerous. Maybe I'm just "Stock trader profiling" here, but maybe E*Trade was right to deny him...after all he could have lost millions, gone berserk and killed 13 people. I hope stock trading firms and markets all around the US and Canada keep an eye out for these strange brokers who lose money. Many of them wear Armani suits so anyone wearing those should be watched by the people in charge - perhaps sent home and forced to change into the proper attire so they conform with the traders who are "winners". Parents should watch out that their stock trading (grown) children don't start exhibiting some of these traits...and if they do seek treatment right away.
I hope we don't have copy-cats....
The preceeding was a big bowl of sarcasm with a pinch of irony added for flavour. You can bet we WON'T have this reaction when one of the establishment acts just like the kids at Columbine did...
As for the RedHat IPO question...make up your mind. Do we want to have ANYONE buy and sell stocks/IPO shares or only those who know what they are doing or who can afford to be fleeced? 60 minutes did a big story about 2 month ago about "Day trading" which seemed to indicate that all of this should be done through an experienced broker. So this guy will angrily complain that E*Trade won't let him in for the RedHat IPO but if they did, he'd complain that they fleeced and inexperienced trader if RedHat bombs. Doesn't look to me like E*Trade can win.
Never by hatred has hatred been appeased, only by kindness - the Buddha
I sent both these messages to postmaster at both E*Trade and Red Hat and I would have expected that atleast Red Hat would be sensible enough to actually respond to their postmaster mail. I'm glad to say though that Red Hat DID reply today, but only after I threatened to block their computers from sending any messages to my computers.
Both E*Trade and Red Hat has expressed how sorry they are and assured me that I won't receive any such messages in the future, so they're safe. For now. But I'd still like to point a finger in Red Hats direction. Sending spam is one thing, I get enough spam so one mail more is no big problem, but not answering the postmaster mail, or answering a week after having received the message.. That's a whole other story.
Ah, but open source is not just rejecting the capitalist economy. It is embracing an *alternate* economy (see ESR's work) based on (among other things) respect.`
The Red Hat IPO issue is (just one) place where these two economies come violently into conflict.
[
This sense of entitlement is appalling. If you didn't want it to be possible for someone else to take your work and make money off of it, then you should not have given them explicit permission to do so by using an open source license on your contribution! How hard is that to grasp? Red Hat owes you nothing, because they are only doing exactly what you expressly told them they were allowed to do.
It's a very nice gesture for them to have extended this offer, and it's too bad that some people aren't allowed to participate because of factors outside of Red Hat's control. But the way so many of you are acting like something you deserve has been taken from you is just sickening. Grow up.
I would think that hackers would have a better understanding of how this stuff works: if you want to play a game, first you need to understand the rules.
E*Trade has rules, and the SEC has rules, and apparently most of you weren't even aware that they existed. That should be a pretty strong indication that you don't know enough about this game to play. Whine all you like about how this should be your decision, not E*Trade's and not the SEC's, and that you should be allowed to do any stupid thing you want, but the bottom line is, it's not your decision, and there's nothing you can do about it this week. (If you like, campaign to get the SEC's rules changed. Good luck.) You're shouting at the wind, here, people. These rules have existed for a long, long time, and they're not Red Hat's fault.
Perhaps if you do some research, and actually understand the rules of this game, you'll still be able to get in on the deal. Perhaps you'll even be able to do so without breaking any laws. You certainly won't be able to do so without risk -- nobody can. But no, whining on Slashdot like spoiled children because someone didn't make it even easier for you is less hassle.
Red Hat tried to do something nice (out of generosity, not debt), and you're beating them up for it. When someone gives you a gift that, for whatever reason, you can't use, you're supposed to thank them anyway, not start screaming.
The Redhat IPO is FAR from a sure thing.
Redhat's stock value stands a good chance of getting virtually WIPED out when the net stock bubble bursts dragging all tech stocks into the
dust. Amazon, ebay etc cannot continue to be valued this highly with no profits forever.
When they go down they'll go down hard - a realistic valuation of most net stocks is roughly 1/30 of current value. This could well happen shortly after the Redhat IPO.
If you really want to buy RH, I suggest buying some then, when it's nice and cheap.
http://rareformnewmedia.com/
Well, sure. I've been annoying people for months by pointing out Red Hat boxes (on computer store & bookstore shelves, etc) and telling them proudly, "my name's in that box". But most people don't really get it.
Wouldn't it be great to say, "I own part of that company"? And yes, I suspect many of us will end up buying Red Hat stock whether we get it pre-IPO or not --- if only because we've already got the accounts on etrade. But the investment strikes me, at least, as far riskier if I buy in the first rush than if I pre-own.
But the reason for the finger-pointing isn't about money. I'd still point out the Red Hat stock even if I had to admit I'd lost a couple of thousand dollars on the stock. I'd try to explain how cool it was I managed to acquire stock in the company in the first place -- that I took part in a huge net-wide project to create killer software, and that when Red Hat finally made it big based on that collaborative effort, they made us all part of it. Not because they had to, but because they were participating in a radical new thing, a hacker gift-economy, where money isn't as important as respect and community.
[
Sure, you could sue, but you wouldn't win. E*Trade has every right to refuse to let you in on the IPO if they feel you are not qualified to participate. Remember, they're supposed to try to prevent people from "flipping" the stock - i.e. buying at the IPO price and selling in the afternoon if the stock goes up. People with no stock trading experience and very little liquid net worth are much more likely to try to get their money out by flipping the stock. I don't see a problem with E*Trade's criteria.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
This Article on BBC news points out that the Internet generated over 300 billion in revenue and over 1.2 million jobs.
That's very little. Perhaps you don't realize that there are over 150 million jobs in the US, putting the Internet's share at under 1%. Just the oil industry (BP Amoco, Exxon, Mobil, Shell, etc.) generates a lot more than 300 billion in revenue, not to mention the rest of the non-Internet marketplace.
If they do not understand where we are going and do not line up the people (hackers) that are in a good position to understand what is going to work and what will not and purhaps make lots of money along the way. Then they are going to be that online trading house that failed in the 90's that no one can quite remember the name of.
The problem is that these "hackers" do not have a clue as to how the stock market works. Just because you can code C does not make you qualified to spend money that you cannot afford on a risky IPO that may or may not go up.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
It would appear that this whole debacle has much less to do with E-Trade than with the SEC in the States. E-Trade does have an obligation to show some diligence qualifying potential investors in a highly speculative investment. Like it or not, this has very little to do with protecting the individual investor. This is about making sure 1929 doesn't happen again. But, hey, if you want to go back to the days when inexperienced investors could buy on margin to overinflate the market... A small price drop can cause a lot of inexperienced investors to panic and jump. This can cause a larger price drop. Then we've got a potentially destructive ripple effect that affects other things than just RHAT stock.
That said, I don't believe that the guys here wanting to get in on the IPO will be into short-selling. I don't believe that the E-Trade questionnaire achieves its purpose of identifying stable potential investors.
BTW - I didn't get The Letter, and I wouldn't have been able to use it anyway - I'm not a U.S. resident...
This is about Redhat, a coorporation that rewards people for helping them. I don't know about you, but I want to be apart of that. I would like to say that I have more than a passing interest in the company.
I want to be an original owner in RedHat, get their official earing's report, going to stockholders meetings, and all the other things that go along with being a stockholder.
RedHat has done a lot for us, and if RedHat has community share holders that will be better for them and us.
geach
Who knows the risks of this particular venture better: experienced traders or those of us who live in this world? I would suggest hackers are among the most sophisticated and knowlegable in these market segments.
On your point about being fair to E*Trade, I agree. They just don't understand the situation. If they are going to handle it, however, they need to learn fast!
Geeky modern art T-shirts
Fuck them! My hair is long and my sandals are worn. That's who I am. That's who all of us are. And we fucking wrote the software that Red Hat sells. We own the company in a far more real sense than any of the moneyed lords with sufficient "liquid net worth" to take part in the IPO. They're auctioning my software off on the New York Stock Exchange to the highest bidder, and I can't take part!
Wow.
Open Source Economics takes a whole new turn...
I'll have to integrate this stuff into that essay-cum-Linuxworld-Presentation. A major point I've been arguing is that those who suffer the direct effects of inferior software are more likely to create the fixes for various shortcomings than a body only indirectly connected to the financial pain. Almost all companies have a serious monetary stake in the stable operations of their computer software, and a growing number have realized that such a mission critical part of their business demands the elimination of propietary risks.
In the age of UCITA, open code may be the only thing you can trust. Buying software from companies that support false advertising, remote killswitches, and censorship is akin to hiring Hannibal Lector as your person plastic surgeon--or Master Chef.
Relevance? Consider the financial impact of Open Source on investors. Want your stock to do better? See a specific area of weakness that you percieve is reducing the value of your stock? Fix it. Yourself.
The amount of people funding OSS projects is about to increase...substantially. Fascinating.
See you at LinuxWorld!
Yours Truly,
Dan Kaminsky
http://www.doxpara.com
Once you pull the pin, Mr. Grenade is no longer your friend.
cjs
The world's most portable OS: http://www.netbsd.org.
Wrong. You may believe that you know how successful RedHat will be as a company, but that has very little correlation to how successful their stock will be! The stock market is driven by analysts, and those analysts are driven by other analysts and marketing.
Experienced traders know that the greatest impact on the stock market is things like the labor report that caused the market to go down significantly yesterday. RedHat may be doing just incredibly awesome, but what if Saddam Hussein decides to invade Iran the day after RedHat IPOs? Do you realize that this could cause ALL US stocks to go down, even RedHat?
Someone who has to "scrape together" $1200 ($1000 of which was to be used to pay back debt!) should not be investing that money in the stock market, even in a "sure thing" IPO.
On the other hand, I do not support what E*Trade was doing. I think that if the author wanted to blow his entire life savings, they should have let him.
If you want to invest in the market and have that kind of money, you should be starting out small, by investing $50/month in a mutual fund (Fidelity has Tech-oriented funds).
What strikes me as odd about all this rumbling about IPO shares, RH, E-trade, SEC, etc is the
./-ers are exhibiting the same mob mentality that allows fans to get
attitude of many of the posters that somehow they are entitled to some preferential treatement.
Frankly I am appalled that
crushed at concerts and soccer games. It's not any different. People at the back push and push
because by some happenstance, they are caught in the back of the bus. There's a lot of bad karma
that comes with this kind of selfishness.
Why should anyone be allowed to invest money in RH if they don't want you too? Quite frankly,
if RH wanted to, it could allow people to purchase stock in the company before any of this IPO thing
happened. I didn't see too many people clamoring for shares at RH's door. Now at the end of the
rainbow, the masses come a-knocking? Or was it that it was too risky to invest before?
Why didn't they do this before the announced IPO? Although I don't know the reason, I would
speculate that they didn't want to dilute the shares for their current investors and employees.
These investors and employees took the risk, and now are seeing if the market will reward them.
However, had they allowed small, unaffiliated investors into the company before (and I'm sure
they have), with SEC rules regarding unregistered securities, they would have to pass a similar
investor test that E-trade is giving now. There is really no difference.
The best way to think of un-affiliated IPO shares is like a sweepstakes where the prize is unknown.
Some people get the chance to buy, some people don't. It's just the hand you are dealt.
For those who say they believe in the company, just buy some market shares about 2-months after
the IPO when the price dips. Chances are you'll get the same result w/o all the heartache.
To those that want to make a quick buck, start your own company. Don't try and ride the
coat-tails. What you say that's too hard? Well that's part of the risk-reward equation.
Entitlement culture is just a manifestation of the emotion of envy. Do you envy your next-door
neighbor because they have a new K7-600MHz PC? Do you envy people who get food stamps because
they don't have to earn their food? Do you envy a winner of a scholarship? Perhaps you will be one
of the rich people someday who will insist that the US govt should pay you social security
benefits because you are entitled to it even though you know the poor widow/widower down
the street could use the money more than you.
Or maybe you envy Linus and the attention that he gets for Linux even though there are many people
who work on it? What ever happened to long term thinking? If the RH IPO succeeds, then the
chances are better for everyone else that follows. In fact, the companies who dominate the industry
rarely are the first ones. Most of the time the leaders just end up with lots of arrows in the back.
Don't envy, we can be better than that.
This whole RedHat IPO crap is really irratating me. I've seen a half dozen different explanations of how RedHat choose the special 1000 who got the infamous e-mail. Most of them tell a different story, and RedHat hasn't been saying officially how they picked it.
My guess is the explanation that they sent the letter to the lead coder on each of their various packages seems the most reasonable to me.
That's quite a kick in the balls though to the various people (including myeslf, this whole post is very selfishly motivated) who have contributed innumerable patches, bug fixes, suggestions, and new features to many of those various packages. Pushing RedHat at various corporations, submiting bugs to them on their RPMS, etc...
RedHat could've done a better job of the process I think. I'm kind of irratated that I didn't end up on the list simply because none of the software I've written has ended up in their distribution, or the code has since been removed. (Used to have a few patches in the kernel five or six years ago, but its long since gone...)
They also should've thought of this issue of investment experience before they filed for the IPO. They could've done a private placement to the invitees, and then files for the IPO.
So this guy empties out his safe deposit box and bets all the money he's saved to pay off his student loans on Red Hat stock? That's the reason E*Trade has these rules. Investing is risky. Putting all your money into one stock believing it's a sure thing is sheer folly. Some IPO's have fallen flat. Even net stock Quokka (or something like that) went down, not up after it's IPO this week. The previous article on the Red Hat road show brought to light what appears to be a lack of enthusiasm about Red Hat's business model among sophisticated investors. People are treating stocks like tulips these days and brokerages are establishing rules to help keep people from getting burned. If all these hackers lost their meager savings in Red Hat, you can believe that they'd also be bitter about the whole thing. At least this way they still have their money.
Now I'll be the first to admit that most of my investment is tied up in shares of the company I work for. (A double no-no since I already work here, I should diversify into other investments in case the company has a downturn and I not only lose my stock investment, but my job as well). But I am taking a calculated gamble knowing that I have invested no more than I can afford to lose. If my stock ends up worth $0, it will hurt, but I won't be losing my whole life's savings and it won't jeopardize my ability to service my debt load (which is just my mortgage). You've got to take a hard look at this stuff and be willing to plop down your money knowing there is a chance you might lose a lot of it.