• Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint
Share this Page URL
Help

Chapter 11. Snakes and Ladders: Spinning... > Red Flag 7: Buying Hot IPOs After Tr...

Red Flag 7: Buying Hot IPOs After Trading Begins Is an Easy Way to Lose Your Shirt

Unless the system for initial public offerings is completely overhauled and there is an opportunity for all to bid through an open auction, investors should remain very wary of being sucked into buying a new issue in the days immediately after it starts trading. One of the biggest transfers of wealth during the recent technology stocks boom and bust was from smaller investors ignorant of the risks to Wall Street’s most prized clients, such as WorldCom’s Ebbers, and insiders at the companies going public. The top clients knew full well that the stocks they had been given in the IPO allocations were getting ridiculously overvalued and got out within minutes, hours, or days (at a big profit), while the uninitiated were left holding the baby, the bath, and the bathwater.


PREVIEW

                                                                          

Not a subscriber?

Start A Free Trial


  
  • Creative Edge
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint