E*Trade Opening Red Hat IPO to Members

TBC writes "Etrade's IPO center is now accepting indications of interest for anyone with an E-Trade account. They will probably continue accepting indications of interest until 5:00pm CDT. Get it while you can... " Today is apparently the deadline for the last round of folks trying to get in before the public. A lot of people got theirs. A lot more didn't. If nothing else, this has been a learning experience for a lot of people. And a pretty profitable one for E*Trade too I bet. Update: 08/04 10:20 by CT : A few people noted that the times up.

Comments

Be Careful

[Trepidity]

Disclaimer: I'm not a stock broker, don't take this as a replacement for real investment advice, just a warning from an amateur stock-following-person.

Most people seem to be treating this as an easy way to make money. I'd suggest not spending any money on the stock that you can't afford to lose. If I read the information correctly, E*Trade is requiring you to hold on to the shares for at least two weeks before selling off. Tech IPOs overall do not have a great record over the first two weeks. They sometimes go up the first day (though interestingly, all four tech-related IPOs yesterday closed the day below their IPO price), but those gains rarely hold, and you won't be able to take advantage of them, since you're not allowed to sell off early. Most importantly, if you don't get in on the IPO, don't buy the stock as soon as it starts trading publicly. Almost all IPOs, especially tech-related ones, go down significantly from their market opening prices.

A few examples:
Be, Inc. (BeOS): IPO at 6, opened at around 8, currently at 6.
Mp3.com (MPPP): IPO at 28, opened at 92, currently at 29.

Both IPO'd around two weeks ago, so now would be your first opportunity to sell off the shares with E*Trade's policy. As you'll see, you'd make virtually no money with either one of them. If you didn't get in on the IPO, and bought when it the stocks started trading openly, you lost money - a lot of money if you bought mp3.com at 92.

Part of the reason mp3.com jumped and then nosedived is because people thought they owned the mp3 technology, then realized they didn't. This could potentially happen with Red Hat as well, as a few hours later people start realizing that Red Hat doesn't own Linux.

So, my non-expert advice would be, if you can get in on the IPO and can spare the money, buy it as a stock to hold for the long haul, not as a quick way to make money (since that most likely won't happen). If you can't get in at the IPO price, wait a few days for the stock price to drop off before buying some.