Wit Alters IPO Rules After Investor Griping
Wit Capital Corp., an online investment bank, has changed the way it allocates shares in initial public offerings to give all customers an equal chance to buy.
The first IPO affected: Wit’s own $60.8 million stock sale.
Some customers were gaining an advantage in being allotted IPO shares because they had better Internet access, stayed online longer or had software alerting them to postings on Wit’s Web site, said the company, which has distributed shares for more than 62 IPOs.
Starting Thursday, investors have a period of time in which they can e-mail Wit to say they want to buy shares in an IPO. Investors who send e-mails within that time will receive equal consideration.
If demand for shares exceeds Wit’s allocation, a computer will randomly select who gets stock.
“We’ve endeavored to create a fair first-come-first-served system, but some people are disadvantaged by time,” said Susan Berkowitz, senior vice president. “Sometimes your e-mail cannot be delivered in a timely way because of your Internet service provider.”
If Wit has enough shares to meet demand of customers who respond within the initial time period, remaining shares will be awarded to customers who respond after the end of the period in the order they respond.
The initial response time period will vary with each transaction. In Wit’s IPO, it started at 5 p.m. Thursday and was to end at 11:59 p.m. The typical allocation is 100 shares per customer.
Several Wit customers complained about the old allocation process, saying they didn’t get shares even though they responded immediately to postings on Wit’s web site.
Wit’s accounts more than tripled in the first four months of the year to 41,000 amid an explosion of interest in buying and selling of stocks over the Internet.
Wit’s offering of 7.6 million shares at $7 to $9 each is expected to be completed around June 1.
At $8 a share, the company would be worth $560 million.
The company lost $4.9 million on revenue of $3.9 million in the first quarter.--Bloomberg News
