US online brokers band together
Three major US discount brokers will form an online investment bank to secure a larger slice of the initial public offerings (IPO) market.
Three major US discount brokers will form an online investment bank to secure a larger slice of the initial public offerings (IPO) market.
According to Dow Jones Newswire service Charles Schwab, TD Waterhouse and Ameritrade will come together in a bid to convince major Wall Street underwriters to allocate a greater share of IPO shares to the new investment bank.
The new partnership is indicative of the lack of impact online investors are having obtaining IPO shares even though online stock trading is regarded as a force by major Wall Street securities firms.
The reason for the lack of impact is most IPOs are still controlled by the major players such as Goldman Sachs, Merrill Lynch and Morgan Stanley Dean Witter, who logi-cally tend to allocate most IPO shares to their best customers, usually larger mutual funds and institutional investors.
Waterhouse president and chief operating officer Frank Petrilli says individual inves-tors have been under represented in the capital formation process.
Ameritrade president and chief operating officer Jack McDonnell says most IPO shares are handed to institutional investors, who are not always the best or most desir-able long-term investors.
Shares in IPO's are keenly sought as they tend to raise sharply after issue and this has been seen with many of the Internet issues routinely doubled or tripled on their first day of trading.
The new bank intends to hire analysts to research companies in the technology and telecommunications sectors since these analysts usually have some influence on which firms get selected as co-managers of IPOs, thus helping those firms get stock for customers.
AUTHOR
Jason Spits
Recommended for you
ASIC has permanently banned a former Perth adviser after he made “materially misleading” statements to induce investors.
The Financial Services and Credit Panel has made a written order to a relevant provider after it gave advice regarding non-concessional contributions.
With wealth management M&A appetite only growing stronger, Business Health has outlined the major considerations for buyers and sellers to prevent unintended misalignment between the parties.
Industry body SIAA has said the falling number of financial advisers in Australia is a key issue impacting the attractiveness and investor participation of both public and private markets.
