posted on October 23, 2002 02:23:48 PM new
Wow. Thanks for the link, reamond. I'd never heard of internalmemo.com.
While the practice of distributing juicy IPOs to banking clients (with the obvious goal of snaring that client's company's investment banking business) was as Meg says "quite common", there is some dispute as to it being "perfectly legal".
I wonder about some of the eBay employees reading this memo whose investments had been decimated by the tech collapse. Were they really so thrilled to learn that Meg made $1.78 million because she had access they didn't?
Somehow I doubt it.
-
fluffythewondercat, PowerSeller times two
[ edited by fluffythewondercat on Oct 23, 2002 02:24 PM ]
posted on October 24, 2002 11:19:22 AM new
Being ethical and having integrity in business should mean going beyond what is legal.
What gets me is why these billionaires are messing around picking up a couple extra million on these IPOs or other questionable stock deals.
You would think that if like Martha and Meg, you had made billions from the company you manage why waste you time and effort, and risk your reputation on small change IPO deals ?
Its sort of like Hugh hefner cruising for street hookers.
posted on October 24, 2002 09:30:33 PM new
Not to go on my second rant of the night -- BUT......
Corp Greed & Cheating?
The practice was in fact legal - so get over it -- it's analogous to any seller on this board, giving a repeat or valuable customer favorable pricing or special insight into a deal.
But I seriously doubt any of the sellers pointing fingers are going to stop giving their top customers special treatment.
The legal issues (To My Knowledge) have to do more with analyst coverage then anything else.
IPOs in of themselves aren't shady or questionable -- the only reason *some* of them look bad now is because Internet Stocks were overhyped and overrated -- if the Bubble hadn't burst or if a lot of those companies had turned a profit, no one would call it "shady" in retrospect.
In fact, just because you invest in a stock that later tanks, doesn't mean make it neccessarily shady.
E.g. A corporate executive investing in an IPO isn't a bad or shady deal unless they know for a fact that the company's stock is an outright scam -- those tech companies were just poorly managed companies with big dreams and little substance, they werent' scams -- most businesses fail, they just did it publically.
Myself and a lot of friends of mine, invested in Tech Stocks and IPOs and none of us have Meg Whitman like connections or "ins" with Investment Banks. We may not have gotten the best initial price, but we still made money.
This is nothing more then the usual bashing of large corporations and successful people that seems to be a favorite past times of the posters here.
Power Seller Bashing, Bashing Rich People, Successful Enterpreneurs, Corporate Execs -- unless you have a legitamate Beef with that person, it's all the same nonsense.
As for Meg's employees being mad at her -- well, it's likely she lost money too, after all, she invested in the same overinflated market that they did -- and they could've been smart and gotten out before they lost money --- nor did her actions cause the market to crash -- she was just an investor in this situation, just like anyone else -- an investor with an advantage, yes, but still an investor.
As for corporate greed. Give me a break -- how many of us have businesses? How many of us are trying to grow our businesses as much as we possibly can? Isn't trying to get as much as you can of something, particularly more then you need, the definition of greed?
Out of the big time sellers, the high volume people who basically do this full time or rather are very serious about it --- is there a sales level where you'll stop because you don't "need" more money, or will you just keep growing the business as much as possible?
Let me guess, it's the latter?
So maybe some people should get over the corporate greed nonsense..........I've never heard of the rule that once you make $X, you're no longer allowed to be greedy.
-M
A corporate, greedy, money grubbing and capitalist power seller.
posted on October 25, 2002 11:00:14 AM new
pretegra345- You misunderstand what the issue is with Meg getting the IPO stock. It has nothing to do with bubbles.
posted on October 25, 2002 11:55:02 AM new
No kidding, Reamond.
The problem is not that Meg bought IPO stock.
The problem is that Meg was one of a handful of special customers who were offered IPO stock AT AN ARTIFICIALLY LOW OPENING PRICE.
Are you not aware that hundreds of millions of dollars were "left on the table" by the investment bank underwriters of these IPOs? What they did may very well be criminal.
Here's how it worked:
BigInvestmentBank underwrites the IPO of SockPuppet.com. A fair opening price is $30 per share.
But BigInvestmentBank offers these shares on opening day to its special customers at $9 per share. The stock rises to $45 by the closing bell. Those special customers sell the stock right away, capitalizing on the opening day dramatic rise in prices.
Here is the problem:
SockPuppet.com gets only $9 per share (less underwriting fees, etc.) in capital from the stock offering. $21 per share has been "left on the table" for BigInvestmentBank to lavish on its special customers, which it does in hopes of winning their investment banking business.
SockPuppet.com folds within a year because it is undercapitalized. Average investors, who bought because the stock was going up like a rocket, take it in the shorts.
posted on October 25, 2002 01:31:51 PM new
Actually No -- I'm quite aware that Meg got IPO stock -- and I'm aware that her cost basis was lower then what the general public got.
I'm also aware that major institutional investors got a lower cost basis then the general public -- in fact, when a new IPO issue hits the streets - Retail Banks, Investment Banks, Mutual Funds, Pension/Retirement Funds and affluent Mega investors, company insiders, employees and family members, etc, typically get al lower cost basis then the average Joe -- it's the benefit of better access, having more money, etc.
I have some stock options in a company that pulled it's IPO due to bad economic conditions a while back --- but let's say that the IPO did go through --- I as an employee could've bought stock at a lower price then the general public, so could some of my family members. Am I taking part in a shady deal? No, it's legal and perfectly ethical.
But here is the thing -- to my knowledge, the company offering the stock has to approve lower prices for certain groups, why? Because this is THEIR stock they're selling and the lower the price, the less capital the stock will raise. It's always a trade off between generating investor interest and literally leaving money on the table. In the end, the lower prices bit many Internet companies in the bum because they could've used those dollars of extra capital to stay in business longer -- particularly after the bubble burst and companies realized they had to tighten their belts --- if they had more capital, well they might've been able to stay in business longer, find a way to survive, or just keep people employed longer and in the end, it would've been better for the economy.
That's why I mentioned bubbles -- some of the IPO pricing scehemas look "shady" to some because the companies ended up failing --
Regardless, I don't think that these deals are "shady" or greedy, if there is something you'd like to buy, you're greedy for getting a cheaper price? If you have a favored and valued customer, you're shady for giving them a better deal? I just sold a good friend a bunch of electronic goods for cost -- am I know shady because I charge people on eBay more then I charge my friends, or "insiders"?
As Meg said in her memo, these deals were legal AND in addition to that, they were of public knowledge.
The only reason people are "investigating" these deals is that after the Enron, Worldcom, Adelphia and Tyco fiascos, people feel better if it appears that people are "going after" corporate big wigs, investigating malfeasence, etc. People hear the word "insiders" and start pointing fingers -- not the case for this one (IMHO) -
-----anyway, I think it's funny how the people on this board are pointing the fingers at Meg "who made eBay too corporate and now I'm Mad" Whitman (as she's known around these parts) ---- and not at the dozens of other execs who took part in similar deals, calling the deals shady when they were legal, wondering how she could take the risk -- when there is no risk to begin with........just another case of the people on this board trying to find something they can use to attack one of their favorite targets.
If you want to talk about illegal deals -- let's talk about Martha Stewart, an obvious case of fraud -- not someone who bought the stock according to the rules, and sold it according to the same rules.
posted on October 25, 2002 05:00:35 PM new
There is a big problem with how these people get the IPO stock.
The issuing company does not have a say in the IPO prices to any group. The shares are tendered to the banking concern to do pretty much as they wish. The company may retain shares for employees ect..
Giving special favor to people such as Meg is exactly what is troubling public confidence and is shady at best.
The equities market is a public venue for selling and buying shares of stock. Some individuals having preferential information and/or non competitive pricing of those shares undermines the public confidence in the market and causes wide spread suffering, while unjustly enriching a few.
What Meg received as preferential pricing on IPO shares as well as the opportunity to buy those shares is colorable as pure bribery.
The "bubble" has nothing to do with going after these crooks. Insideres have been prosecuted when the market is high or low.
posted on October 25, 2002 05:11:40 PM new
Reamond: I agree.
Martha Stewart's case is really interesting. The government is using a particularly reaching interpretation of insider trading laws to go after her for criminal charges (or rather, is rumored to be about to go after her); it is also likely she will be brought up on civil charges for lying about the "arrangement" she was supposed to have had with her broker about sales of ImClone stock when the price dropped to a certain point. (This is actionable because the statements were made in an apparent effort to bolster the stock price of her own company, Martha Stewart Omnimedia.)
What I'm saying here is that it seems likely some new ground will be broken with regard to questionable stock practices. Meg could be caught up in it.
posted on October 25, 2002 06:26:41 PM new
There is a big problem with how these people get the IPO stock.
The issuing company does not have a say in the IPO prices to any group. The shares are tendered to the banking concern to do pretty much as they wish. The company may retain shares for employees ect..
>>Giving special favor to people such as Meg is exactly what is troubling public confidence and is shady at best. <<
I could've sworn that public confidence was shaky because of
1. A Bad Economy
2. Accounting Fraud/Scandals
3. Executives robbing the companies blind.
These "favors" aren't a big secret -- I seriously doubt that's what's causing the problem.
>>The equities market is a public venue for selling and buying shares of stock. Some individuals having preferential information and/or non competitive pricing of those shares undermines the public confidence in the market and causes wide spread suffering, while unjustly enriching a few. <<
Employees & Families of employees get better pricing before an IPO, ditto for large investors institutional investors and high rolling investors -- why focus the attention entirely on the Megs of the world, while ignoring employees, their families and large institutional investors.
By the time a new IPO issue hits the street -- the big investors have already snagged up several shares -- why focus on the targets people love to hate and not go after other people who get better pricing?
>>What Meg received as preferential pricing on IPO shares as well as the opportunity to buy those shares is colorable as pure bribery.<<
You're reaching here --- Bribery to do what? Bribing her for eBay's investment banking business? That's hardly bribery, I could've sworn that bribery involved paying public officials to do special favors (often illegal ones at that) --- not doing someone a favor to get their business.
By your way of looking at things -- every time a company takes a potential/existing customer out to lunch, on a golf outing, gives them a gift, any of the various things that companies do to get business -- that's bribery too?
Nonsense -- it's called salesmenship.
>>The "bubble" has nothing to do with going after these crooks. Insideres have been prosecuted when the market is high or low<<
Too bad the law says otherwise -- Meg didn't break the law. While this practice may be frowned upon in the future by a bunch of busy bodies looking for a scandal, it was legal and no rules were broken.
Like I said -- this is not insider trading A'la the Martha Stewart case.
posted on October 25, 2002 06:31:03 PM new
>>Martha Stewart's case is really interesting. The government is using a particularly reaching interpretation of insider trading laws to go after her for criminal charges (or rather, is rumored to be about to go after her); it is also likely she will be brought up on civil charges for lying about the "arrangement" she was supposed to have had with her broker about sales of ImClone stock when the price dropped to a certain point. (This is actionable because the statements were made in an apparent effort to bolster the stock price of her own company, Martha Stewart Omnimedia.) <<
Reaching? I doubt it. If Martha sold her stock based on information from Imclone's CEO about the FDA denying approval of her drug, she did so with insider knowledge and that is more or less the text book definition of insider trading. In other words, she sold her stock based on information that only insiders would have -- information that she knew would drop the stock's price the next day -- so she got to benefit while the public suffered.
Preferential pricing which is extended to large groups of people with a better relationship with the Investment Bank and Company going public for an IPO is a lot different from buying and selling stock based on insider information.
>>What I'm saying here is that it seems likely some new ground will be broken with regard to questionable stock practices. Meg could be caught up in it.<<
Meg is unlikely to get caught up in anything --- don't hold your breath.
posted on October 25, 2002 06:53:19 PM new
Retaining shares for employees and/or others are declared before the IPO and the public can discern any questionable dealings from the public information. I know of one situation where the CEO didn't report shares given to his daughter before the IPO and when it was discovered, the IPO was denied by the SEC.
You're reaching here --- Bribery to do what? Bribing her for eBay's investment banking business? That's hardly bribery, I could've sworn that bribery involved paying public officials to do special favors (often illegal ones at that) --- not doing someone a favor to get their business
Not reaching at all. It is easy to see the situation as lining a billionaire's pockets with easy money to get corporate and personal business from her. In fact, this type of insider dealing is at the heart of the scandels plaguing corporations.
Bribery has never been limited to public officials. It has been illegal to use bribery in business dealings for quite awhile in the US. It leads directly to non-competitive markets and unjust enrichment. Many US companies get into trouble with it by bribing foreign companies and/or government officials while doing business with foreign entities. Bribery is an accepted business practice in many countries, but not in the US.
Most companies have very strict rules regarding accepting or giving any gifts to a vendor or business customer. These IPO "opportunities" are just that- gifts.
posted on October 25, 2002 09:56:31 PM new
Well I don't know #*!@ about stocks, but I have heard analyses similar to Fluffy's; that the companies themselves are damaged due to underfunding caused by being hollowed out at IPO. So yes it is hurting someone. But if this is an accepted business practice, then it may be difficult to discern between a real IPO, and a calculated fraud where a new company is simply driven into the dirt to line somebody's pocket.
Just because an action is (or is claimed to be) legal, doesn't make it ethical. The law will catch up to these billionaires who manipulate our economy for their own profit. Creating companies that are meant to survive for only one day so that a few people can manipulate the stock is wrong. It's fraud; it's a scam. Unfortunately our capitalist system is based on the principle that greed is okay, it doesn't matter who gets hurt.
posted on October 26, 2002 09:34:34 AM new
The guys at Enron claimed that their legal council cleared their funny accounting/partnerships too. Unless the lawyer cleverly crafted their memo, they may be disbarred. But this "bad" legal advice doesn't clear the officers of Enron.
