[trader220]

Originally Posted by KC911

Less than a buck for MSFT you say...well my cost basis is 0...I'm gonna be rich I tell ya ! Serious question for you...how do those IPOs work in divying up the shares for you pros? As I recall, GOOG IPO'd at around 80, but when it became available to us "common folk", it was around 100...that was one I did get get lucky on (but for a VERY modest amount). I remember taking an early lunch so I could be by the computer at 12 noon that particular day. As I recall, GOOG was handled a bit differently at that time compared to most other initial offerings. Thanks...

All of the IPO’s (not GOOG) are basically shopped around by the underwriters (investment banks). They are allocated huge blocks of shares according to their participation in the underwriting. Its their job to then go out and parcel those shares out to other firms. Your firm can get a chunk but the price is not quite settled on until the allocating firms report on how difficult it was for them to parcel it out. Sure its easy to find buyers for the good ones but much more often then not its not easy for the Investment Banks who did the underwriting to unload all the shares. Those firms who get in on these IPO’s have a couple things to consider. For everyone that’s a layup homerun there are plenty more they have to take which may be iffy or outright overpriced. The firms who take these shares off the Investment Banks have to do their DD and establish what they think fair value is. Then they can decide how hard it will be for them to allocate the shares to their clients and if they want to suck it up in hopes of getting bigger pieces of the homerun ones. They also cant just flip the shares in the open market. Most of the time there is about a 90 day restricted period where they have to hold onto the shares.

10 years ago there were a ton of homeruns in the pipelines but these days it’s a lot harder game and you have to be very sharp on valuing the IPO and your ability to move the shares you get.