Slashdot Mirror
Red Hat IPO Fiasco Worries E*Trade Stock Holders
An anonymous reader wrote in to say that earlier this morning, discussions about the Red Hat IPO fiasco started appearing on the E*Trade stock board at Yahoo. E*Trade stock holders are worried about class action suits, complaints to the SEC, and even cracking of E*Trade's servers. I've heard many things (nothing official yet) that all the
major outstanding issues will be resolved on monday. I still don't
know if I'm eligible, although I did get the letter.
I received "the letter" from Redhat too. But I could not take them up on their offer to participate in their IPO. I wanted to, but because I am a Registered Representative with a member firm of the National Association of Security Dealers (NASD), I am not allowed to participate in what is called a "hot offering" (getting first crack at a desirable issue of stock).
Please note, I am at the bottom of the NASD food-chain (i.e. I'm a Customer Service Rep for a Mutual Fund transfer agency and I have to use NT) and the "hot offering" restriction applies as much if not more to those who outrank me. So much for the "Big Boys" argument one person was making.
As for the heartfelt arguments in the Salon article, please consider the brokerage's position. They are required to determine suitability before they can take one penny from you. Suitability has to based on your answers to questions about your financial situation and investing experience. If you are lacking in either area, the brokerage can't take your money.
What happens when the brokerage takes your money for an investment which is not suitable? Simple, they become law-suitable.
If what I've said seems ludicrous in a market which seems to have only an upward direction, I suggest you print this message, seal it in an envelope marked "Do Not Open Until the Dow Drops More Than 500 Points," then read it again.
The General Public will be able to participate in the purchase and sale of RedHat stock the day of the Public Offering. It's not clear what day that will be. All the hooplah here is because certain investors (myself included) expect the pre public offering price to be significantly lower than the high price and low price on the first day of trading. Thus, if one can get in before day 1 of trading, some money can be made.
If you just dig the idea of owning RedHat, wait until a week or so after the offering, when most of the hype has bled out of the stock, and buy it.
For an interesting historical look at a successful IPO, and the weeks after, take a look at the first month of ebay pricing. It dropped for the first two weeks, and then took off again. For a look at a stock that probably won't do that, check out Be's stock (BEOS). My bet is that BEOS is going to sit where it is for a while.
Ok, first my opinion is the mistake was miscomminucation between RedHat and Etrade, nothing more. Etrade has a set of rules and guidelines for customer's investing in IPO offerings (whether I agree with them or not). RedHat should've checked out what those guidelines were before blindly sending out emails to individuals and telling them to sign up to accounts.
Now what sorta stinks is Etrade's policy, first they do not tell you when the IPO is going to be offered. You have to make a general guess, and sit in front of your computer and refresh the IPO current offering's page. You have about two hours to fill out a ten question profile to see if you qualify. These restrictions have loosened a bit, so more might get in. Etrade "suggests" you hold the stock for at least 30 days, but will not restrict you from selling earlier than 30 days. Be warned if you sell within 30 days, it might effect your chances of future offerings. Companies want long term investors, and they are not going to allow Etrade to offer IPO if Etrade customer's are wannabe day traders.
Also remember Etrade wants you to invest at least 100 shares or $1000 minimum (I am not TOTALLY SURE ON THIS NUMBER but close). If you don't have that kind of money my recommendation is if you have some friends you REALLY TRUST! go in together under one account. Preferbly in the name of someone with some long term trading background, as they will more likely be accepted for IPO offerings. Just say "Hey I got $500, you got $500 let's pool are money together and buy". I would agree beforehand on when to sell, (ie when it hit's $62 a share or drops by $5 whatever comes first).
Whatever you do, don't let the system get you down, and prevent you from making the investments you want. It's to easy to say "Screw this, this is a pain in the ass". Just remember, the system was designed by the Rich, for the Rich. Joe's (and Jane's) like us just have to work harder within the system, and we can do it.
Awesome!
The problem is that if the average person is allowed to get in on IPOs, they won't go up anymore. If all the stock is bought by slashdotters with no stock trading experience who are looking to sell out immediately (within the same day), there's no reason for the stock to go up in the first place. Everybody wants to sell, so the stock goes down.
The only reason IPOs go up is that people who are planning on holding on to the stock buy most of the IPO shares, not a bunch of slashdotters.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
On the other hand, it IS a "set-aside". It appears that E*Trade is attempting to have as few "Red Hat hackers" as possible buy shares so that their own "fat cat" investors (i.e., those who make more than $x of trades with E*Trade per month) can get in on the early IPO stuff.
:-(.
Red Hat is probably furiously trying to figure out how to get E*Trade's pie off their face at the moment...
Oh. I got the letter. But currently all I'm invested in is credit card debt from my last two job moves, so no IPO for me even if I were willing to lie on the questionaire
-E
Send mail here if you want to reach me.
The problem isn't that they're restrictive -- the problem is that their restrictions are ridiculous. Investing $1500 of my savings in an IPO -- even a particularly risky one -- is not the same as day trading with borrowed money.
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And no, I'm not a stock market expert, but on the other hand, I'm not stupid. I'm not going to invest more than I can afford to lose.
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I realize that an exception might have been made in the case of the Red Hat IPO, given the reaction to the lockout. In response to the people who have been decrying this apparent attempt to keep from the People the ability to Cash In, it must be pointed out that, in light of the recent Atlanta shootings, any relaxation of the requirements for online traders is unlikely to happen in the near future. Maybe this is a Good Thing.
Its not the SEC stuff that bothers me. What bothers me, is the fact that E-Trade lied. I spoke with no less than three seperate operators on E-Trade's Red Hat IPO Hotline the very day I recieved my letter, and asked all three the same set of questions just to be sure I knew what I was getting into. One of those questions was, "You realize, the vast majority of us are college students, about 18-24 years old, with very little money, and very little investment experience. Is this going to be a factor when it comes to our eligibility?"
That turned out to be a lie.
I've had an account with E-Trade since January -- I had damn near $7,000 in my account at the time I filled out the Eligibility Profile.. Hell, i've even traded on IPO stocks in the past!..My entire damn portfolio is always been made up of tech-sector/internet stocks. But yet, I failed E*Trade's eligibility profile. Now, it seems, the damn company has given people the green light for its customers to *lie* on the eligibility profile in order to get in. Fsck that, lying makes you just as bad as the assholes who require you to do so in the first place. I reserve the use of my middle finger for situations like these. I'd be real curious to hear from someone who did get past the eligibility profile without lying. I'd bet anyone five bucks to a donut that getting in without lying is impossible.
Silly me. I should have started trading high-tech stocks when I was four years old, and made my first million by age six.
Bowie
PROPAGANDA
Bowie J. Poag
Bowie J. Poag
Er..doesn't class action lawsuits require a, um, class of people to agree to sue? It seems to me that a bunch of geeks like myself to suing over what amounts to be nothing is pretty laughable.
The problem is that very money motivated individuals have problems understanding non-money motivated individuals.
The only thing that worries me is that a opportunistic lawyer could sucker a some into a lawsuit 'freeride', where they would bear the cost and you would get money (or consideration) if they won, and lose nothing if they lost. That seems to be where most supposed 'class-action' lawsuits come from these days.
jf
1) The Stock Market. There has never been any guarantee that you will win, lose or break even.. Deal with it.
2) Even a cursory examination of the Etrade site makes it extremely clear that there is no guarantee that you will receive any shares whatsoever, in any IPO, no matter who you are.
3) I've read "The Letter", and it doesn't offer any guarantee of allocation. Only that you have a better chance, since you have a login, rather than being lucky enough to hit the magic window.
4) All of that being said, I think Etrade could be more honest about the way IPO's are done. For example, I did not discern from the site that A) Unless you are a "Experienced Trader", you can't get alerts that the IPO window for a certain company has opened. B) Since the window is only guaranteed open for two hours, they recommend that non-experienced traders go look every hour! That's what makes the RedHat letter so nice.
Once again, "The Letter" makes things a lot easier, but there was never a guarantee of allocation in any case. Stop the whining!
Jeez, compared to the sig to noise ration of these investment morons to, Slashdot looks like paradise! Half of em are spreading dis info in order to short the stock, a few honestly believe band of evil "hackers" are going to come out to destroy the computers, and some are just plain stupid. Then ETrade says extremely smart Linux programmers are "unfit to invest"?!?
Erik
Well this turned out to be a fine mess!
I suddest people keep a cool head about this. Redhat's IPO ain't the beginning nor the end of Linux. And it's certainly not the beginning nor end of your careers either. An IPO is just that. An Initial Public Offering. A way for businesses to raise money through selling portions of itself to the public. It's *not* the ultimate solution to redeem yourself for years of selfless work. Hey, that's what selfless work is. Sometimes it's thankless too.
Red Hat is taking steps to do damage control here. Let's let them work this out. I suspect that in the end this will work out for most people who got "the letter". If we let it. You decide.
I'd also like to suggest that there might have been a slight, um, overreaction on the part of, oh, everybody. :^) Whether this was by tetosterone-laden teenagers or disgruntled programmers or corporate marketting agents spreading their FUD through covert channels, I think that, well, we need to keep this from escalating. Despite not getting the letter, I might want to invest in this company in the future. Actually, I might want to use Linux at whatever jobs I get in the future, too. This IPO will help. Screaming holy hell about being denied an opprotunity and writing angry letters to Wired and Yahoo! and Salon won't. I mean, it really really won't.
Well, I hope the best for Red Hat and all parties involved. Here's to a successful IPO, and World Domination(TM). :^)
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