Early IPO Stock Offering

[craigster59]

I was contacted today by the V.P. of a company that I work with that is going public. They have been in business 10 years, are tops in their product and recently won a 250 million judgment for patent infringement (theft).

In appreciation for what I've done for him and his company (product exposure in film and T.V.) he's putting me on the list of "Friends of the Company" for early stock offering. The stock can be held or "flipped" the same day.

Has anyone done one of these deals before, and are there questions I should be asking? Thanks, Craig

[kjb]

I think it depends on if the IPO is priced right. You should check how friends and family did in Vonage's IPO.

/ Johan (not an expert on these things)

[legion]

This is still how IPOs are done as far as I know. Stocks almost always rise dramatically on the day of their IPO and then decline slowly in the following days and months. You've just been put on the list to make a buttload of money off of suckers. I wouldn't pass up the opportunity.

My 2¢.

[legion]

Originally posted by kjb
I think it depends on if the IPO is priced right. You should check how friends and family did in Vonage's IPO.

/ Johan (not an expert on these things)

I assumed the syndicate backing the IPO has done its due diligence and priced the IPO right. That is of course no substitute for your own research.

[craigster59]

The stock will go off in the 15-17 dollar range and could possibly realize a 20% return if flipped. It seems like a great opportunity to flip some and hold some, I've just never had this offered before.

[competentone]

Originally posted by craigster59

Has anyone done one of these deals before, and are there questions I should be asking?

Read the prospectus carefully.

Be asking yourself:

What are they going to be doing with the money they raise?

Does the plan make business sense?

Do you understand the business and plan?

Would you buy the stock when it went public even if you didn't have the ability get in on the IPO before public trading starts?

Essentially, look at it like you would any other stock investment.

Most importantly, if you plan on selling the first day of trading, make sure you have it set up with your brokerage company where you can effectively "short" the stock while you wait to receive your shares from the IPO. (You understand that you probably will not get your shares until a few weeks after the IPO; an initial pop won't do you any good if you cannot sell the shares until a few weeks later when the stock could be trading a lot lower.)

[trader220]

I’ve done a lot of these deals over the years and you don’t hear about the ones that are just flat openers and don’t pop. For everyone one of the really good ones we used to get we would have to take 5 or 10 lame ones and 2 would be losers. There is NO guarantee on these things they’re not free money by any means. What IB is doing the deal? I would start there. You see a good name on the deal that’s a decent start. If it’s some small shop you don’t know then it’s iffy at best.

Give us some more info to work with and I can help a little more.

[Moneyguy1]

Some suggestions:

1. Do not bet the entire farm

2. Bet a couple of acres if the farm is big enough

3. Make certain there are no restrictions on how much time must pass before you can bail

Much more info is needed for a proper opinion to be made by anyone.

[jluetjen]

Also consult your tax accountant. Keep in mind that anything that you acquire and sell that fast will be treated as "normal income". So -- at a minimum -- put aside at least a percentage of the returns equal to your tax rate to pay Uncle Sam. Take into account that your returns may bump you up a bracket or cause the infamous Alternative Minimum Tax to kick in. It's not a big deal to peel off 40% +/- of your new found wealth to pay to the government since you get to keep 60% +/-. That is, unless you spend it all before next April. If that happens, you'll be in a world of hurt!

[craigster59]

The underwriters are Piper Jaffray and Deutchesbank. I've been waiting for them to go public for a few years, it's nice that they've shown appreciation for some of the stuff I've done for them. I just don't want to jump in blind, that's why I decided to go to the "Pelican Brain Trust".

[craigster59]

Well, thanks for the input guys. Made a little of the "dough-re-mi" today. Sold some and held some, but it worked out very well.

http://www.forbes.com/feeds/ap/2007/08/08/ap3999474.html

[Rick Lee]

I have a good friend whose company's IPO was last week. He made no mention of it to me. I learned of it because his company uses my company for putting out news releases for SEC disclosure compliance. So I'm not sure I would have been allowed to buy anything even if I had been on the list. But had I been in on it, I'd have probably bought a lot. And the price hasn't moved at all. So maybe I got lucky.

[TheMentat]

Originally Posted by competentone

Most importantly, if you plan on selling the first day of trading, make sure you have it set up with your brokerage company where you can effectively "short" the stock while you wait to receive your shares from the IPO. (You understand that you probably will not get your shares until a few weeks after the IPO; an initial pop won't do you any good if you cannot sell the shares until a few weeks later when the stock could be trading a lot lower.)

That's good advice!

[pwd72s]

Originally Posted by craigster59

I was contacted today by the V.P. of a company that I work with that is going public. They have been in business 10 years, are tops in their product and recently won a 250 million judgment for patent infringement (theft).

In appreciation for what I've done for him and his company (product exposure in film and T.V.) he's putting me on the list of "Friends of the Company" for early stock offering. The stock can be held or "flipped" the same day.

Has anyone done one of these deals before, and are there questions I should be asking? Thanks, Craig

Flip...

[VaSteve]

Originally Posted by Rick Lee

I have a good friend whose company's IPO was last week. He made no mention of it to me. I learned of it because his company uses my company for putting out news releases for SEC disclosure compliance. So I'm not sure I would have been allowed to buy anything even if I had been on the list. But had I been in on it, I'd have probably bought a lot. And the price hasn't moved at all. So maybe I got lucky.

Generally SEC rules dictate that you can't talk about it during the quiet period. ie, you're not supposed to build hype. Someone else could discuss it more authoritatively...it's not my core competency.

[techweenie]

Not a huge downside risk.

The underwriter will move heaven and earth to get the IPO oversubscribed to put upward pressure on the initial trades.

The smart brokerage (and Piper Jaffray qualiifies) will leave 20% on the table for their favored clients (and themselves).

The IPO environment is critical, so is the last XX weeks of news.

Give some thought to how you'd feel holding shares in the company 6 months or a year from now (long term capital gains are taxed at a lower rate). If you feel good about the company's prospects, that should nudge you toward doing it.

But just one more data point: When AAPL went public, I asked for similar consideration, but the shares were oversubscribed several times over. Even Steve Jobs couldn't reserve shares for me! IOW, 'friends of the company' are often an afterthought when a company is struggling to cover the shares they're selling... any diligence you can apply now will serve you well.

[on2wheels52]

If you have some speculation money to spare and you have some empathy for the company, give it a go. Not the most conserative investment out there but one should take an occasional risk if in a financial position to do so.
btw, my Piper Jaffray account changed to UBS Financial Services some time ago. I wasn't aware the name was still in use.
Jim

[craigster59]

Well, I held a few thousand shares and Jim Cramer featured the stock on Friday..
http://www.cnbc.com/id/15840232?video=546747595