The underwriters are alleged to have given shares in these
hot IPOs to clients who agreed to pay them excessive fees or kickbacks in exchange for these IPO shares or agreed to buy additional shares of the stock in the secondary market--at higher prices.
On the same day, the customers received large allocations of two
hot IPOs.
The underwriter defendants have previously settled with the SEC and NASD and the NY Attorney General, and CSFB's Frank Quattrone was convicted of federal criminal charges related to these
hot IPOs.
That is, underwriters, especially those with influential analysts and a willingness to allocate
hot IPOs to the personal brokerage accounts of issuing firm decision-makers, could have changed their pricing policies in order to leave more money on the table.
Instead of rushing in to buy Alibaba, why not check out a couple of
hot IPOs from 2013 to see how they're faring?
The general rule is that IPOs start to trade at NYSE at 9:15 am, but
hot IPOs trade a little bit later like the General Motors IPO that began trading at 9:36 am and Twitter at 10:49 am.
Excluding AIG and settlements over laddering in initial public offerings -- where underwriters inflate prices by handing out shares of
hot IPOs to buyers who promise to buy more later -- the average settlement was $41 million, and the median was $7.
Read the February issue of Business Review Canada for a list of the
hot IPOs on the horizon.
Thus, my finding indicates that retail investors place their purchase orders with aggressive prices, and their trades help to push up the stock prices and contribute to the high open-to-close returns of
hot IPOs.
The idea behind Google using a Dutch Auction IPO was to help prevent underpricing that traditionally occurs in
hot IPOs and also allow small investors the ability to buy shares.
Of course, as already noted, with
hot IPOs, few investors have access to the bargain stocks anyway.
Those probes focused on whether the CFSB had received kickbacks in the form of excessive commissions from hedge funds in exchange for
hot IPOs.
