Word: witness
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Dates: during 1990-1999
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...demand," he says, "you should have an impact on price." If 10,000 Little Guys keep collectively offering $14 for IPOs whose syndicates are offering $12, wouldn't IPO candidates start urging their underwriter to give small investors a place at the table? And might not these populist wrinkles--Wit plans to sell similar venture-capital shares in pre-IPO start-ups--affect numerous deals down the line, shifting profits from bankers to entrepreneurs and the masses, perhaps even changing the way whole industries get financed? Might Andy Klein have just sparked a financial revolution...
...once didn't exist. Some 3,500 intrepid souls bought $1.6 million in stock via the Spring Street Website; 18 months and numerous SEC consultations later, Klein hopes that by year's end 100,000 customers will each have invested around $16,000--a total of $16 billion--in Wit Capital...
...have this business to himself. The two online brokers, E*TRADE and e.Schwab, have each announced similar initiatives that are, unlike Wit, tied to specific underwriters. E*TRADE will offer IPOs managed by McCaffery's Robertson Stephens; e.Schwab will work with Hambrecht & Quist. E*TRADE's Cotsakos envisions the same tiny 100-share minimum as Wit, while e.Schwab's minimum, a snooty $100,000, writes off the Little Guys that Wit hopes to empower...
Some advisers think the high minimum isn't such a bad thing. Maybe betting the nest egg on hype-heavy IPOs is just another way for middle-class families to lose their shirts to financiers who wear nicer shirts to begin with. What will happen the first time Wit sells shares of some loser at $12 and they promptly sink to, say, $4? "These deals tend to be highly volatile," says a banking executive. "They appeal to people who can afford a certain amount of risk. But the mom-and-pops? God love 'em. It's not easy...
What's worse, Wit penalizes customers who flip their buys for quick bucks. Selling Wit IPO shares less than two months after you buy them will not only cost you 5% of the sale price but also land you at the back of the line next time around. Klein admits this radical strategy--aimed at both encouraging stay-the-course investing and stroking the underwriters who want to stabilize their young companies' stock--removes one ace from his customers' hands. Still, he argues, buying and holding at the offering price is a better bet than buying during...