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IPO Game Show

By Jim Rendon

In these early months of the new millennium, news about the stock market has reached the deafening roar of an afternoon at the stockcar races. But there's no need to doze passively in the cheap seats with a warm beer. Whooping it up with the rednecks in the infield has never been easier.

Initial public offerings, the high buzz and often hugely profitable sector of the market, are now within reach of nearly anyone.

When a company wants to sell part of itself to investors on the market to generate money, it has what is known as an initial public offering. Stock prices are based on the interest of institutional investors, such as the managers of mutual funds. Traditionally, only these investors, their top clients and individuals directly involved with the company have had access to shares at the offering price. Once these groups buy in at a fixed price, the stocks hit the market, where prices can rise or fall. Lately, they've been rising. The first 72 IPOs this year rose 153 percent on average.

The Internet has opened the once-gilded IPO door to anyone with a few thousand dollars to spare. Online trading companies like E*Trade, (www.etrade.com), Wit Capital (www.witcapital.com) and FBR (www.fbr.com) offer limited access to IPOs. In order to get in on an IPO, investors need to check with their online investment house about what offerings are available. Most investment houses use a lottery system to decide who will be able to buy in. Shares, generally priced between $12 and $30 each, are limited to 100 or less. Most investors get into about 1 out of 15 or 20 offerings for which they try. But even then, a $1,500 investment can double, triple or better.

But not all IPOs do well. And investing in any IPO is considered risky. So don't forget to do some research before laying down your hard-earned cash.


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From the March 16-22, 2000 issue of Metro, Silicon Valley's Weekly Newspaper.

Copyright © 2000 Metro Publishing Inc. Metroactive is affiliated with the Boulevards Network.

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