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Red Hat Affinity Offer Extended Until Friday
Just a fast note: if you're one of the Linux developers who got left out of the "give back to the community" chance to get in on Red Hat's IPO yesterday, you have a second chance. We have heard, and I have called E*Trade and confirmed, that you now have until 3 p.m. EDT tomorrow (Friday) to get in on the deal. Clarification - From an E*Trade VP who called me at 6:10 p.m. EDT: You must have already met the offer requirements, and have already submitted your conditional offer if you're still going to get in on the deal. If you have, please call 650-331-5856 to reconfirm by the Friday 3 p.m. deadline. I personally believe everyone's heart is and was always in the right place on this whole thing, but, as they like to say in government, "mistakes were made." Update: Red Hat CEO Robert Young is now worth $472 million, according to this Globe & Mail story.
Not everyone can sell their stock at any price to the public (otherwize I can think up lots of ways
to scam the public).
There are many securities laws on the books that require stock transactions to be recorded at
fair market value, so even if someone bought it at 14 and sold it to you at 15, the seller would
have to pay taxes as if they sold it to you at 70... Then if you turned around and sold it to
someone at 20, you would have to pay taxes on the $5 gain and still wouldn't be able to write off
the $50 difference (although there are some exceptions for gifts)...
Alas, stocks aren't as simple as dollars and cents...
More likely RH is taking advantage of securities laws that allow up to 3 days to close the IPO
and are taking these share from the overallotment reserve that usually comes with each IPO
registration. Normally these shares are used to cover "rounding-errors" created when trying
to match stock lots between large institutional investors to percentages from the allocation
formula. Often the left overs are just distributed to the broker/partners of the large
institutional investors.
So in this case the small guy is making out instead of the wall street suits... yea!
I just wish I had made my name more visible. As it was, the one RPM of my stuff got taken out after RH 4.2...
Only 10 percent of Red Hat stock was made available in the IPO. Presumably RedHat is making a few more shares available at the original price to the affinity group. (I'm just guessing, no firsthand knowledge.)
-- Alastair
Comment removed based on user account deletion
Wow, wish I *hadn't* called yesterday to confirm my shares. Talk about a gift!
I guarantee that there won't be many of the following conversations with E*Trade:
"And how many shares would you like to confirm?"
"Gee, I dunno, this could be a risky proposition... I better just do 100."
"Ok, golly, good luck! I sure hope they do well. But you never know..."
There is actually a formula for determining market price depending on the spectrum of active bids
and asks
Unlike options trades, there is a certain matching requirement for bids. The reason it's not allowed
is because if you sell at 50% of market, you are not allowed to say who buys the shares. To be
fair you have to match your ask with someones bid which is probably not the bid of the person who
you were trying to sell to.
Think of it this way. If you ask $10 and someone else asks $40, the top bid is $50 and the next
bid is $30, what is the fair way to do this? Do you sell all of your $10 shares to the $50 guy?
Or do you sell your shares to the $50 guy for $50? Or should the $30 guy get to buy some shares
if you agree to split the difference?
What keeps a middle man from bidding $51, getting your shares for $10 and selling it to the old
top bidder for $50 and pocketing the difference? Not so simple huh? And these are simple problems
compared to having 1000s of bid and 1000s of ask and limit orders etc, etc...
Non-market trading of public companies is highly regulated because the of the fraud potential.
When the difference is 1/4 point, millions of dollars can be made or lost by the way you select
how the orders match up. The market makers are accused on a daily basis that they manipulate
things by placing a whole bunch of strategically priced orders on the books.
Just think if you made an ask 50 points below market or a buy 50 points above market...
Who gets to benefit from that transaction? Things could get really complicated...
Now if you have a private company, you can pretty much do whatever you want... no need to be fair...
Right, this isn't all too different from an 'option' in the sense that it doesn't really matter what the market valuation of the stock is, just the amount of money the stock issuer will take in exchange for the certificate.
For example, my company grants me 1000 shares of stock at an option price, lets say $20, but the option isn't 'exercisable' for 2 years, then I have a limit of 10 years after that to buy the stock.
If in three years the stock is being traded at $50 on the open market, I can exercise my options at $20x1000 shares if I can scrape up $20,000. Of course I can sell these the same moment on the open market or hold them, the company doesn't really care. They don't buy the shares on the open market and sell them to me at a loss. They hold these shares in reserve until someone exercises an option, at least that's how I think it works.
The same would hold true here. RedHat isn't buying back shares at open market value of $70 and selling them to you for $14. These shares are being held either by the company or the underwriters. It is a fairly good gesture of goodwill that they are popping these out to those who missed out. Its gotta be a small percentage of the total stock, but I'm sure its cheap insurance against lawsuits or (even worse) pissed off contributors.
(and I doubt this comes out of e-trade's hide as someone else posted)
So, if you didn't fill out the form with your trading history on it before the normal deadline (several days ago), you can't get in.
It's probably worth calling them and bugging them just in case you are on their magic affinity list (affinity members who "indicated before the deadline").
Sean
I just called e*trade and was told that this extension is ONLY for those people who placed an indication of interest at $10-$12, and then missed the 10 minute re-confirmation window when the IPO was repriced at $14.
So if that's you, get on the phone.
Those of us who received "Offer not suitable" from the screening page are still out of luck.
All in all, a very interesting and educational experience.