Apparently I was luckier than I realized, as I received an allocation of 100 shares from E*Trade.
I've seen a lot of mis-information posted, so let me try to clarify a few points. Please bear in mind that I do not consider myself a financial expert; I'm just someone who has traded stocks and options via E*Trade for the past five or six years.
As far as my receiving an allocation of shares, that is pretty much the luck of the draw. I've put in for dozens of IPOs through E*Trade, but I've only received allocations in 4 of them up to now: ASDS, IMAN, RETK, and LNUX. They've all done well, although LNUX has easily eclipsed the other three (so far). I take E*Trade's admonition to "hold for at least 30 days" seriously, so I haven't sold any shares in any of them yet, though I expect to sell IMAN and ASDS shortly; I will probably hold on to RETK for the long term, as I think it has excellent prospects.
As far as holding on to LNUX, I'm sort of torn. I hope to hold it at least through the 30 day period, not only because of E*Trade's "rule", but also to avoid the tax consequences this year.
Is LNUX, at nearly a $9 billion market cap based upon Friday's close, overvalued? Yes, by so-called "traditional" methods of valuation. (BTW, RHAT has a market cap of about $18.7 billion, Amazon.com of about $33 billion, and MSFT of nearly $500 billion.)
The problem is that the value of a stock is really a function of supply and demand, that is, how much is anyone willing to pay for it. Right now, anything even vaguely related to Linux is hot. I expect (but, of course, I can't possibly know for sure) that Linux related stocks will stay hot through at least the middle of January, and I further expect that there will be a lot of new money coming into the market in January (the so-called January effect). So I think LNUX might be "safe" to hold for 30 days. That is, it might lose some more of its value, but after 30 days I think it will still be selling at significantly above its IPO price. If I'm wrong, and I see that LNUX begins to plunge, I might re-evaluate my decision to hold on for at least 30 days.
Regarding the stock price and how it helps the company, there are a couple points to make. First of all, the company only receives money from the initial offering, in this case the 30 bucks a share (after the bankers take their fees, of course). So from that point of view, it was good for VA Linux that the underwriters decided to raise the offering price. The company ended up receiving nearly 3 times as much as they originally expected. On the other hand, the higher price might have prevented some people from getting into the offering.
Does the high stock price benefit the company? No and yes. No, the company doesn't receive any money directly from the appreciated price, but they might at some point do a secondary offering. Also, they can reward their employees with stock options (the way MSFT and many other companies do). This can be a great way for a company to compensate its employees if the stock price continues to climb.
Additionally, the company can use its stock to acquire other companies. The higher its stock price, the more it can "pay" for aquisitions.
Slashdot Mirror
I've seen a lot of mis-information posted, so let me try to clarify a few points. Please bear in mind that I do not consider myself a financial expert; I'm just someone who has traded stocks and options via E*Trade for the past five or six years.
As far as my receiving an allocation of shares, that is pretty much the luck of the draw. I've put in for dozens of IPOs through E*Trade, but I've only received allocations in 4 of them up to now: ASDS, IMAN, RETK, and LNUX. They've all done well, although LNUX has easily eclipsed the other three (so far). I take E*Trade's admonition to "hold for at least 30 days" seriously, so I haven't sold any shares in any of them yet, though I expect to sell IMAN and ASDS shortly; I will probably hold on to RETK for the long term, as I think it has excellent prospects.
As far as holding on to LNUX, I'm sort of torn. I hope to hold it at least through the 30 day period, not only because of E*Trade's "rule", but also to avoid the tax consequences this year.
Is LNUX, at nearly a $9 billion market cap based upon Friday's close, overvalued? Yes, by so-called "traditional" methods of valuation. (BTW, RHAT has a market cap of about $18.7 billion, Amazon.com of about $33 billion, and MSFT of nearly $500 billion.)
The problem is that the value of a stock is really a function of supply and demand, that is, how much is anyone willing to pay for it. Right now, anything even vaguely related to Linux is hot. I expect (but, of course, I can't possibly know for sure) that Linux related stocks will stay hot through at least the middle of January, and I further expect that there will be a lot of new money coming into the market in January (the so-called January effect). So I think LNUX might be "safe" to hold for 30 days. That is, it might lose some more of its value, but after 30 days I think it will still be selling at significantly above its IPO price. If I'm wrong, and I see that LNUX begins to plunge, I might re-evaluate my decision to hold on for at least 30 days.
Regarding the stock price and how it helps the company, there are a couple points to make. First of all, the company only receives money from the initial offering, in this case the 30 bucks a share (after the bankers take their fees, of course). So from that point of view, it was good for VA Linux that the underwriters decided to raise the offering price. The company ended up receiving nearly 3 times as much as they originally expected. On the other hand, the higher price might have prevented some people from getting into the offering.
Does the high stock price benefit the company? No and yes. No, the company doesn't receive any money directly from the appreciated price, but they might at some point do a secondary offering. Also, they can reward their employees with stock options (the way MSFT and many other companies do). This can be a great way for a company to compensate its employees if the stock price continues to climb.
Additionally, the company can use its stock to acquire other companies. The higher its stock price, the more it can "pay" for aquisitions.
--JT